UK Gilts yield falls to fresh low as Britain votes to leave EU after 43 years in bloc
Source: FxWire Pro - Money Market / 24 Jun 2016 03:46:44 Eastern Standard Time
The UK gilts yield fell to an all-time low on Friday after Britain has voted to leave the European Union after 43 years in an astonishing referendum that threatens the breakup of the nation.
Also, rising possibilities on further policy easing from the Bank of England drove investors towards safe-haven buying.
The yield on the benchmark 10-year gilts fell more than 30 basis points to 1.074 percent, yield on super-long 40-year bonds dipped nearly 27 basis points to 1.924 percent and the yield on short-term 2-year note slid 23 basis points to 0.294 percent by 07:40 GMT.
Britain has voted to leave the EU in a popular revolt that will send shockwaves across Europe, leaving David Cameron’s premiership hanging in the balance and triggering financial market turmoil across the globe. With all the votes counted, 51.9 percent voted to sever Britain’s 43-year membership of the EU, 48.1 percent to stay in.
Moreover, following the UK electorate's historic decision to jettison EU membership, Prime Minister David Cameron is to step down as PM in three months time. This suggests Chancellor Osborne will stand down as Finance Minister as well.
We expect the Bank of England (BoE) to ease its monetary stance in August when they will publish the Quarterly Inflation Report, while the first action would most likely be a cut to Bank Rate. However, the BOE is unlikely to rush into any monetary policy action.
In addition, Bank of England said in a statement after referendum result that they will take all necessary steps to ensure monetary and financial stability and has undertaken extensive contingency planning. Said they are working closely with UK Treasury, other domestic authorities and other central banks to stabilise markets.
Today, crude oil prices dropped more than 6 percent as 'Leave' Camp Leads in 'Brexit' Vote. Meanwhile, the International benchmark Brent futures fell 6.40 percent to $47.63 and West Texas Intermediate (WTI) climbed 6.31 percent to $46.95 by 05:20 GMT.
Following the UK referendum decision to leave the EU the FX market has gone into meltdown with the Pound falling massively overnight. GBP/JPY is currently down almost 13 percent, GBP/USD -9 percent, GBP/CHF -7 percent and GBP/EUR -6 percent, and these are not the low points reached.
At one stage overnight GBP/JPY was down by 15.3 percent on the day at 133.50, GBP/USD was down 11 percent at 1.3240, GBP/CHF -9.6 percent at 1.2875 and GBP/EUR -7.7 percent at 1.2035. Markets remain highly illiquid and volatile say traders with no sign of any G7 joint intervention, so far.
The British pound has been absolutely hammered by the news that Britain has voted to leave the EU. Sterling has suffered its biggest ever drop, and is currently hovering around $1.36, down 8.5 percent (falls to lowest since 1985). Lastly, S&P's Kraemer said that the Brexit vote will lead to a ratings downgrade.
Meanwhile, the FTSE 100 trading down 6.15 percent at 5,951 by 07:40 GMT.© FxWire Pro 2018. All rights reserved. The FxWire Pro content received through this service is the intellectual property of FxWire Pro or its third party suppliers. Republication or redistribution of content provided by FxWire Pro is expressly prohibited without the prior written consent of FxWire Pro, except for personal and non-commercial use. Neither FxWire Pro nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon.