Debt Risk Drops in Europe as Remain Regains Lead in Brexit Polls

Corporate bond risk in Europe fell by the most in three months as polls showed the campaign for the U.K to remain in the European Union retaking the lead.

The Markit iTraxx Crossover Index linked to companies with mostly junk ratings dropped 23 basis points to 349 basis points at 10:55 a.m. in London, the biggest decline since March 11, according to data compiled by Bloomberg. The cost of insuring investment-grade and financial bonds also fell.

Concerns that Britain will vote to exit the EU on Thursday have faded since the murder of pro-European lawmaker Jo Cox last week. The latest poll showed 45 percent of voters backed the Remain camp, while 42 percent were in favor of a Brexit -- a turnaround from early last week when a slew of surveys put Leave ahead and made debt investors rush to hedge investments.

“The market is giving a sigh of relief,” said Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam, which oversees about $5.9 billion of credit. “We’re seeing a bounce in risky assets.”

Still, issuers are holding off on bond sales until after the vote, with Christian Dior SE the sole non-financial company planning to sell securities this week. The luxury product maker is marketing about 300 million euros of five-year bonds, according to a person familiar with the matter, who isn’t authorized to talk about it and asked not to be identified.

“Brexit is having an impact on the primary market -- not just in Europe, but in the U.S. and emerging markets as well,” said Philipp Good, senior portfolio manager in Zurich at Fisch Asset Management, which oversees about 9 billion Swiss francs ($9.4 billion). “We might see some more volatility ahead of the referendum.”

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