UK gilts lose ground following extension of Brexit deadline as investors seek riskier assets

The United Kingdom’s gilts lost ground during European session Thursday after European Union leaders agreed to delay Brexit beyond tomorrow’s cliff-edge and investors shifted towards riskier assets post this decision.

While European government bonds are somewhat weaker this morning, having made gains yesterday on the back of the ECB’s announcements, equities in the region have opened with a mixture of modest gains and losses, and sterling’s little changed too

The yield on the benchmark 10-year gilts, jumped nearly 2 basis points to 1.115 percent, the super-long 30-year bond yields rose 1 basis point to 1.639 percent and the yield on the short-term 2-year traded 2 basis points higher at 0.714 percent by 10:35GMT.

The new deadline, set for October 31, was a compromise. While most leaders would have been content to agree to a longer extension of up to a year to give ample time for the UK to sort itself out, not least for domestic reasons French President Macron argued for a shorter extension to end-June, Daiwa Capital Markets reported.

As a sop to Macron, the EU leaders agreed to review progress again on June 20-21. But while the UK will be expected “to act in a constructive and responsible manner” throughout the extension and refrain from any activity that might disrupt EU policy-making, that date will merely offer a stock-taking opportunity and will not represent a new cliff-edge, the report added,

Meanwhile, the FTSE 100 remained tad higher at 7,424.25 by 10:45GMT, while at 10:00GMT, the FxWirePro's Hourly Pound Strength Index remained slightly bullish at 80.53 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex