Bonds: Gilts investors brush aside strong poll results for Tories
By Alexander Bueso
Date: Thursday 28 Nov 2019
(Sharecast News) - These were the movements in some of the most closely-followed 10-year sovereign bond yields:
US: (closed for Thanksgiving)
UK: 0.67% (+0bp)
Germany: -0.36% (+1bp)
France: -0.05% (+1bp)
Spain: 0.41% (+1bp)
Italy: 1.24% (+3bp)
Portugal: 0.40% (+2bp)
Greece: 1.43% (+1bp)
Japan: -0.08% (+3bp)
Gilts were little changed amid thin trading conditions on Thanksgiving Day, with what few investors were left apparently looking past the results of a YouGov poll released overnight predicting a large majority for the Conservatives in the next Parliament.
According to the pollster, the Tories may clinch a 68-seat majority in the House of Commons.
Investors also appeared to ignore a 451-page expose by Labour alleging that the Conservatives were ready to make major concessions to Washington as part of any trade accord, including as regards the NHS and higher prices for drugs.
That prompted Rabobank's Michael Every to tell clients: "Just consider for a moment: either Boris Johnson is taking mendacity to a new level - which must come back to haunt him in office if he actually follows through as alleged; or Jeremy Corbyn is pushing a medical version of the Protocols of the Elders of Zion to distract from being continuously associated with people who believe the Protocols of the Elders of Zion.
"And one of them is going to be Prime Minister. Is there a more charitable interpretation? One would really hope so."
Euro area bonds meanwhile dipped, pushing their yields higher, after the European Central Bank reported a pick-up in the year-on-year rate of growth in so-called narrow money supply, or M1, in November of half a percentage point to 8.4%.
According to Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics: "the M1 data suggest that the EZ economy will improve next year, not slide into recession as many surveys are still warning."
Historically such readings had been consistent with quarterly rates of GDP growth of 0.3% some six to nine months later.
There was also some market chatter to be seen around ECB president, Christine Lagarde's, recommendation for monetary policy to take climate change more into consideration.
If such proposals resulted in the ECB's balance sheet expansion being targeted on companies that meet 'green' criteria, that would quickly lead to a cash crunch, Every said.
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