PBoC to maintain prudent monetary policy but with flexibility to ensure reasonably adequate liquidity, says Scotiabank
U.K gilts rise on Brexit angst
The U.K gilts gained on Monday as the recent polls showed the outcome of the referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc. The yield on the benchmark 10-year bonds fell 2bps to 1.439 pct and the yield on short-term 2-year bonds dipped 1bp to 0.436 pct by 1110 GMT.
In the latest new U.K public opinion poll released by Opinium over the weekend showed 44 pct of the voters favoured remaining in the EU and 40 pct supported leaving the European Union in the up-coming referendum on 23 June. However, this is similar to most recent surveys showing a modest balance against Brexit. Moreover, the U.K Chancellor of the Exchequer Osborne warned over the weekend that Brexit would cause a year-long recession. The U.K Treasury in its recent report on Brexit concluded that Brexit could cause the pound index to fall 12-15 pct and push up jobless rate by 520k-820k. Added this catastrophic event will lower real wages by 2.8-4.0 pct and could raise inflation by 2.3-2.7 percentage point. Budget deficit could increase 24-39 billion and a Brexit vote would result in a marked deterioration in the economic security and prosperity, they added further.
In addition, the British gilts have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the Bank of England's target. Today, crude oil prices fell more than 1 pct on firm global supply, a stronger dollar and surging output from Iran to Europe and Asia. Moreover, Iranian deputy oil minister quoted that Iran plans to increase oil export capacity to 2.2 million barrels by the summer and has no plans to freeze its level of oil production and export. The International benchmark Brent futures fell 1.25 pct to $48.15 and West Texas Intermediate (WTI) dipped 1.24 pct to $47.81 by 1110 GMT.
Meanwhile, The FTSE 100 fell 0.31 pct or 19.32 points to 6,139 by 1110 GMT on tacking weak crude oil prices.