###UK 5-/10-year Gilt yield spread has been...>

GILTS: ###UK 5-/10-year Gilt yield spread has been trading in a relatively tight

6.5bp range (55bp to 61.5bp) for the past 2-months now, and is currently close

to the bottom end of that range at 55.6bps.

- POV: Markets appear to be already pricing in higher UK inflation data that is

released tomorrow, therefore there could be a larger reaction to a downside miss

than to an upside one. However with the BoE, and the Fed for that matter, more

concerned over the low level of unemployment, consensus within the MPC is that

despite potential for weaker inflation, a rate hike is still likely to rise in

November, with possibility of a further rate increase next year if there is no

meaningful change in UK's unemployment rate. Coupled with hopes that the EU will

agree a 2-year Brexit transition deal in next few months, this could put further

flattening pressure on the 5-/10-year part of the yield curve, pushing it

towards 48bp/50bp (2017 low and low of Jun 26).