European Bonds Mixed on Firm Risk Sentiments Amid Brexit Fear

European Bonds Mixed on Firm Risk Sentiments Amid Brexit Fear

10 May 2016, 13:31
Roberto Jacobs
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European Bonds Mixed on Firm Risk Sentiments Amid Brexit Fear

The European bonds were trading mixed on Tuesday as investors shifted to safe-haven assets amid gains in riskier assets including stocks and oil. Also, bond prices were supported by the recent polls which showed the outcome of the U.K referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc.

The benchmark German 10-year bonds yield, which is inversely proportional to bond price stood flat at 0.130 pct, French 10-year bunds yield dipped 1bps to 0.488 pct, Italian equivalents tumbled 5bps to 1.426 pct, Spanish 10-year bonds yield inched lower 4bps to 1.558 pct, Portuguese 10-year bonds yield fell 4bps to 3.282 pct, Netherlands 10-year bonds yield dipped 1bps to 0.356 pct and British 10-year bonds yield rose 2bps to 1.434 pct by 0945 GMT.

Yesterday, according to recent poll conducted by IPSOS concluded most of the respondents believe that a Brexit would lead to a domino effect in the European Union. Mainly, 48 pct of respondent voted that other European nations would also leave if British votes for separation and Europeans think Brexit will harm the EU more than the U.K. Moreover, 4 out of 10 said that they see a reduced European Union in next 4 years and 49 pct of those polled voted in favour of Brexit. Furthermore, 60 pct of Italians, 58pct of French & 42 pct of Germans think the UK will leave and 45 pct said that their own country should also hold a referendum. On the other hand, In a latest EU referendum poll by ICM published in the Sunday Sun, the Brexit side leads by 46 pct to 43 pct and remaining 11 pct are still undecided. While 45 pct said that immigration in United Kingdom is the biggest factor in the vote.

On the other hand, The European bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the European Central Bank's target. Today, Brent crude oil prices jumped more than 1 pct with supply outrages from Canada and Nigeria helping alleviate the global glut of crude oil.  The International benchmark Brent futures rose 1.49 pct to $44.27 and West Texas Intermediate (WTI) climbed 0.87 pct to $ 43.82 by 1000 GMT.

The markets will now focus on the March industrial production on Thursday (0900 GMT) and Q1 GDP on Friday (0900 GMT). Meanwhile, the pan-European STOXX 600 index was up 1.54 pct and the euro-area blue-chip gauge, the STOXX 50 climbed 1.53 pct. The FTSE 100 Index rose 0.80 pct, the DAX trading 1.06 pct higher and the CAC-40 jumped 1 pct by 1000 GMT.

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