Pound traders seek more security against drop before June 23 vote

Bloomberg

Less than two weeks before the U.K. votes on whether to remain in the European Union, traders are piling into more options on the pound that protect against a decline versus a gain.
The bias toward the downside, the most in at least 13 years, coincided with sterling depreciating for a second week as opinion polls signaled the June 23 vote is too close to call.
Next week, reports are predicted by economists to show faster inflation, the unemployment rate holding at the lowest level since 2006 and retail sales increasing slightly.
Bank of England officials will also make their latest policy decision on June 16. Benchmark 10-year U.K. government bond yields fell to a record low. The data “all feels a little irrelevant given what is coming on June 23,” said Jason Simpson, a London-based strategist at Societe Generale SA.
“It is not trivial in that it will be priced in the other side of the referendum. So a stronger set of data presumably ensures a bigger front-end move on a ‘Remain’ vote as the market mindset reverts to the question of when rates will rise. However, it’s unlikely to be priced in to any degree ahead of the vote.”

Risk Reversals
The premium for one-month contracts protecting against a decline in sterling versus the dollar, compared with those betting on an advance, surged to 7.7 percentage points this week, the most on a closing basis in risk-reversals data.
Concern that Britain will vote to leave the EU and spark a period of economic and political uncertainty in the nation and the trading bloc, has sent currency volatility surging and helped push global bond yields to record lows.