Treasury Futures Fall After ‘Remain’ Leads in YouGov Brexit Pollby and
Survey shows 52% voted to stay in the European Union
‘The markets were ahead of the polls,’ BMO’s Kohli says
Treasury futures declined after a YouGov Plc survey indicated the “Remain” vote held a lead following the U.K.’s referendum on its membership in the European Union.
U.S. 10-year note futures contracts for September delivery fell 1/8 to 130 22/32 as of 6:01 p.m. in New York, according to data compiled by Bloomberg. That comes after a decline of 17/32 on Thursday during regular U.S. trading hours. The poll showed 52 percent voted to remain in the 28-nation bloc and 48 percent chose to leave, in line with earlier surveys, YouGov’s Joe Twyman said in an interview on Sky News.
The move in futures comes after benchmark U.S. 10-year notes fell Thursday, following German, French and U.K. debt lower, as voters cast ballots to determine whether Britain will remain in the EU. The safest government bonds pared gains that earlier this month pushed yields from Japan to Switzerland to record lows amid concern that the U.K. would vote to leave the world’s largest trading bloc.
"The markets were well ahead of the polls in terms of getting to a conclusion,” said Aaron Kohli, a fixed-income strategist in New York for BMO Capital Markets, one of 23 primary dealers that trade with the Federal Reserve. “The issue overnight will be getting more certainty around the outcome because it’s so tight."
The benchmark Treasury 10-year note yield rose six basis points, or 0.06 percentage point, to 1.75 percent as of 5 p.m. New York time, according to Bloomberg Bond Trader data, the highest on a closing basis since June 2.
U.S. 10-year yields dropped to 1.52 percent on June 16, the lowest since August 2012, amid speculation that the U.K. would remain in the EU and after the Fed cut its forecasts for interest-rate hikes.
“The market could see an additional selloff now, but I think it will base around the 1.80 percent level,’’ said Tom di Galoma, managing director of government trading and strategy at investment bank Seaport Global Holdings LLC in New York.
In recent weeks, global bond-market sentiment has swung along with polls on Britain’s referendum. Fed Chair Janet Yellen has said Brexit-related risks played into the central bank’s decision not to raise interest rates this month.
“We will be watching closely to see what the vote is and what possible repercussions it might have,” Yellen said Wednesday in response to questions from the House Financial Services Committee in Washington.
Traders assign a 10 percent probability to a Fed rate increase in July and coin-flip odds to a hike this year, according to futures data compiled by Bloomberg.