The selloff in gilts reversed course...>

GILT SUMMARY: The selloff in gilts reversed course by mid-morning while the

curve has continued to steepen.

- The 2-year benchmark gilt trades at 0.917% down from a morning high of 0.9196%

and the 10-year trades at a yield of 1.718% from 1.733%.

- The 2s10s spread has widened to 80.3bps from 79.3bps and the 2s30s has pushed

up to 116.6bps from 114.3bps.

- The Dec Gilt future trades at 119.6 up from 119.5.

- Breakeven inflation rates have inched lower with the 5-year benchmark down to

3.216% from 3.232%.

- The short sterling futures strip is 2.0-3.0 ticks lower.

- There is mounting speculation that the UK and EU are close to making a

breakthrough on negotiations, but there is yet no substantive confirmation of

this.

- GDP and index of services data for August was broadly in line with consensus,

with a slight beat on industrial production (1.0%  Y/Y vs 1.3% survey).