Eurozone bond yields rise on hopes for Brexit deal approval
LONDON, Oct 21: Euro zone bond yields rose on Monday as investors sold safer assets on the receding risk of a British no-deal exit from the European Union and in the belief that the UK parliament could yet approve a Brexit agreement.
Optimism over Brexit negotiations - last week the European Union and Britain agreed a new deal - has fuelled a selloff in euro zone bond markets. Investors think that some sort of resolution to the Brexit uncertainty would boost the euro zone economy, as well as the British.
The deferral of a crunch vote on the withdrawal agreement in the British parliament at the weekend has done little to reverse that optimism, as the government was forced by parliament to write to the EU to ask for a delay to Britain leaving the bloc.
Natixis rates strategist Cyril Regnat said media reports that suggested Prime Minister Boris Johnson had the numbers to pass his deal was encouraging investors to buy riskier assets and hurting euro zone bonds in early trading.
However, he said the market should be more nervous than it was because the prospect of a no-deal Brexit remained as long as Brussels did not signal it would delay the Brexit departure date of Oct. 31.
"As long as the EU is not ready to send a clear sign of its willingness to extend, I don't see why we should have optimism around risky assets," he said.
The benchmark 10-year German government bond yield rose 3 basis points to -0.356per cent, while other core euro zone yields were also higher. -Reuters