Britain’s 10-yr yields fall to record low as referendum nears

Bloomberg

The U.K.’s 10-year government bond yield dropped to a record before an auction of index-linked debt, the final sale before the nation’s referendum on European Union membership.
The yield could fall further to 1 percent in the event that the U.K. votes to leave the world’s biggest single market on June 23, according to Daniela Russell, a portfolio construction associate at Legal & General Group Plc in London. The Debt Management Office plans to sell 900 million pounds ($1 billion) of linkers due in 2036. At an auction two days ago of 30-year conventional gilts, demand dropped to the lowest level since 2007.
“It is likely that we get to new lows in yields over the coming months,” Russell said. “The broad global macro backdrop has softened again, so even if the market feels some relief after a vote to remain, we are going to have to wait several months for it to become clear whether the recent weakness in the U.K. data is just Brexit-uncertainty related. Given the proximity of the referendum now, Tuesday’s long auction suggests that the auction results today may not be quite so impressive.”
U.K. 10-year gilt yields fell three basis points, or 0.03 percentage point, to 1.223 percent as of 9:01 a.m. London time. It earlier touched 1.22 percent, the lowest since Bloomberg started tracking the data in 1989. The 2 percent security due in September 2025 rose 0.27, or 2.70 pounds per 1,000-pound face amount, to 106.77. The yield on German 10-year bonds touched a record-low 0.033 percent on Wednesday.