Eurzone bonds impacted by referendum threat

Bond prices rose and yields fell again on Friday in the eurozone as investors digested more bad economic news and anticipated a likely “no” vote in Sunday’s referendum in France on the European Union constitution.

One report showed that French business confidence fell in May and another anticipated that German consumer sentiment will be down in June.

Yields on the 2-year Schatz sat at 2.172 percent in afternoon trade in London, while the 10-year Bund was yielding 3.322 percent.

Anticipation of the French vote had investors buying German Bunds, which they saw as less risky, and selling Greek and Italian government bonds.

Analysts believe that either a larger than expected “no” vote or an unexpected “yes” vote in France on Sunday will have a large impact on the bond markets.

Meanwhile, in the UK, gilts were up on long-dated issues but the 2-year gilt saw yields fall 1.1 basis points to yield 4.352 percent.

The 10-year gilt was yielding 4.388 percent, up 3.6 basis points, while 30-year gilts were up 3 basis points to yield 4.326 percent and the new 50-year gilt rose 2.8 basis points to a yield of 4.259 percent.

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