The UK Debt Management.........>

GILT AUCTION PREVIEW: The UK Debt Management Office sells a new 0.125% Aug-28 IL

Gilt on Wednesday for Stg1.025bln

- BACKGROUND: Gilts have broadly rallied since May as concerns about the

economic outlook mount in light of increasing political pressure around Brexit.

However, the latest CPI data show annualised inflation remaining stubbornly

above the official 2% target, which could limit the extent of further yield

compression.

- RV: The current on-the-run 10-year inflation-linked Gilt yield has edged down

to -1.760% from a 2018 high of -1.488% on February 14. The linkers curve has

steepened slightly with the 5s20s spread currently trading at 43bps from a

multiyear low of 25bps on Mar 22. Meanwhile, the nominal 10-year gilt yield has

fallen sharply over the last month, trading at 1.284% from 1.563% on May 17.

Inflation breakevens have been relatively stable so far this year with the

10-year instrument hovering around the 3% mark. 

- TIMING: Results are due shortly after the auction closes at 0935GMT