 "Euro zone bond markets steady as Brexit chances seen receding")
A sell-off in southern European bonds abated on Friday and yields on safe-haven German Bunds pushed back above zero as the murder of a British lawmaker was seen slightly reducing the chance of a Brexit vote next week.
Tensions arising from Britain's June 23 referendum on EU membership have reopened a bond market fault line over the last week between the euro zone's haves and have-nots, in an echo of the debt crisis that threatened to tear the currency bloc apart. Thursday's killing of Jo Cox, a member of parliament who advocated a "Remain" vote, halted a sell-off in risk assets globally, with stocks strengthening and the pound bouncing off a 10-week low. Bookmakers' odds also showed the chances of a vote to leave the European Union decreasing.
"The death of the MP yesterday has taken a bit of heat out of the referendum and might make people on the fence reassess which camp they really want to be supporting," Cantor Fitzgerald senior analyst Owen Callan said. Campaigning for the referendum was suspended and an opinion poll due out on Friday was delayed.
There was also some respite from the sell-off in southern European bonds, which have been at the centre of concerns that Brexit has the potential to choke the bloc's fragile growth and embolden breakaway movements elsewhere in Europe. Italian 10-year yields fell 4 bps to 1.44 per cent , while Spanish 10-year yields tumbled 5 bps to 1.55 per cent. Portuguese 10-year yields slid 12 bps to 3.32 per cent, their biggest one-day fall since mid-April.
Crude oil prices also rose for the first time in seven days, helping market measures of long-term inflation expectations recover slightly from record lows hit earlier this week.
But some analysts cautioned that the rise in risk sentiment may be due to some investors taking profits rather than to a broader reassessment of the chances of Brexit.
"Today's apparent position-squaring moves should be seen as a blip rather than a reassessment of Brexit risks," Rabobank said in a note. "We would expect risk-off to return as the dominant theme as the market reopens on Monday, four days ahead of the vote itself."
Tensions arising from Britain's June 23 referendum on EU membership have reopened a bond market fault line over the last week between the euro zone's haves and have-nots, in an echo of the debt crisis that threatened to tear the currency bloc apart. Thursday's killing of Jo Cox, a member of parliament who advocated a "Remain" vote, halted a sell-off in risk assets globally, with stocks strengthening and the pound bouncing off a 10-week low. Bookmakers' odds also showed the chances of a vote to leave the European Union decreasing.
"The death of the MP yesterday has taken a bit of heat out of the referendum and might make people on the fence reassess which camp they really want to be supporting," Cantor Fitzgerald senior analyst Owen Callan said. Campaigning for the referendum was suspended and an opinion poll due out on Friday was delayed.
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German 10-year bond yields - which have dropped more than 20 basis points (bps) over the last month on Brexit worries - rose 4.5 bps to 0.02 per cent from a record low of minus 0.03 per cent hit on Thursday. Bund yields were on track for their biggest daily rise in almost two months. Thirty-year German bond yields jumped 8 bps to 0.58 per cent in their biggest one-day rise in two months.
There was also some respite from the sell-off in southern European bonds, which have been at the centre of concerns that Brexit has the potential to choke the bloc's fragile growth and embolden breakaway movements elsewhere in Europe. Italian 10-year yields fell 4 bps to 1.44 per cent , while Spanish 10-year yields tumbled 5 bps to 1.55 per cent. Portuguese 10-year yields slid 12 bps to 3.32 per cent, their biggest one-day fall since mid-April.
Crude oil prices also rose for the first time in seven days, helping market measures of long-term inflation expectations recover slightly from record lows hit earlier this week.
But some analysts cautioned that the rise in risk sentiment may be due to some investors taking profits rather than to a broader reassessment of the chances of Brexit.
"Today's apparent position-squaring moves should be seen as a blip rather than a reassessment of Brexit risks," Rabobank said in a note. "We would expect risk-off to return as the dominant theme as the market reopens on Monday, four days ahead of the vote itself."