European Bonds Marginally Up on Weak Risk Sentiments

European Bonds Marginally Up on Weak Risk Sentiments

11 May 2016, 12:26
Roberto Jacobs

European Bonds Marginally Up on Weak Risk Sentiments

The European bonds were trading marginally higher on Wednesday as investors pour into safe-haven assets amid losses in riskier assets including stocks and oil. Also, a favour rising for Britain to leave the European Union on 23rd June has shifted investors towards safe-haven assets.

The benchmark German 10-year bonds yield, which is inversely proportional to bond price fell 1bp to 0.113 pct, French 10-year bunds yield dipped 1bp to 0.474 pct, Italian equivalents tumbled 1bp to 1.486 pct, Spanish 10-year bonds yield inched lower 1bp to 1.608 pct, Portuguese 10-year bonds yield fell 3bps to 3.316 pct, Netherlands 10-year bonds yield dipped 1bp to 0.335 pct and British 10-year bonds yield tumbled 3bps to 1.382 pct by 0910 GMT.

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, the crude oil prices dipped as Canadian oil sand production was expected to gradually ramp up following forced closures due to wildfires, and as record crude inventories especially in the United States put pressure on markets. Industry group American Petroleum Institute (API) said on Tuesday that U.S. crude inventories rose by 3.45 million barrels to a record 543.1 million barrels during the week ended May 6. The International benchmark Brent futures fell 1.21 pct to $44.95 and West Texas Intermediate (WTI) tumbled 1.39 pct to $ 44.04 by 0835 GMT.

According to latest British Chambers of Commerce's (BCC) survey, conducted last month concluded that there is growing support amongst its members for a ‘Brexit’. They mentioned that its members to vote for Brexit increased to 37 pct, from 30 pct in the late January survey. Similarly, members in favour to stay in European Union fell to 54 pct, from 60 pct in the previous survey. Moreover, the IPSOS in its recent poll 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.

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 down 0.59 pct and the euro-area blue-chip gauge, the STOXX 50 dipped 0.75 pct. The FTSE 100 Index tumbled 0.22 pct, the DAX trading 0.59 pct lower and the CAC-40 fell 0.96 pct by 0915 GMT.

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