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Eurozone periphery bonds rally on hopes of further stimulus by ECB to offset Brexit effects

The Eurozone periphery government bonds rallied on Friday as both the ECB and Bank of England will look to adopt accommodative monetary policy platforms and employ greater stimulus measure throughout the European summer to combat the Brexit impact affirmed investor expectations for a prolonged period of easy money.

The French 10-year bunds yield fell 4 basis points to 0.164 percent, Irish 10-year bonds yield moved down 4 basis points to 0.474 percent, Italian equivalents inched lower 9 basis points to 1.254 percent, Netherlands 10-year bonds yield tumbled 2-1/2 basis points to 0.069 percent and the Spanish 10-year bonds yield slid more than 8 basis points to 1.148 percent by 10:50 GMT.

Moreover, Spanish and Italian 10-year bond yields fall to lowest since March 2015. Ireland's 10-year government bond yield fell to record lows this week, dragged down by falls in top-rated euro zone bond yields in the wake of last week's Brexit vote and confidence that Ireland's economy can weather the fallout.

ECB's Peter Praet said that the ongoing recovery has shown signs of strengthening and the ECB is determined to continue playing its pivotal role in consolidating the upswing in the economic recovery.

Similarly, ECB executive board member Benoit Coeure said that the euro-area economy will inevitably suffer from the 'uncertainty shock' created by the UK referendum, even if that impact is difficult to quantify at present. He notes that financial markets have continued t function normally.

In addition, the BoE's governor Mark Carney said the central bank will probably have to ease policy over the summer and the referendum implications for the UK economy are not yet clear, but a 'material slowing' is now the BoE's central forecast.

He further added that uncertainty could remain elevated for some time and have a more persistent drag on activity. He also sees the risk of tighter financial conditions and of spillovers to other economies. This suggests that a 25 basis points bank rate cut to 0.25 percent can be expected during the August 4 MPC meeting.

Meanwhile, the pan-European STOXX 600 index was up 0.08 percent and the euro-area blue-chip gauge, the STOXX 50 jumped 0.07 percent. The DAX trading 0.24 percent higher and the CAC-40 rose 0.19 percent by 10:50 GMT.

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