UK Sovereign

The UK Debt Management Office has stressed that a plunge in Gilt yields following the UK’s vote to leave the European Union will not affect its strategy, as comments by the Bank of England governor sent rates tumbling further on Thursday.

Even if the terms of the UK’s exit from the European Union are tied up soon, market volatility will remain high — with a second referendum on Scottish independence almost a certainty. And this time, a vote to leave the UK is highly likely.

Capital markets people thought Brexit would not happen because the UK electorate always chooses the sensible option in the end. But it hasn’t.

The UK may have knocked the eurozone periphery off a cliff as it stumbled on its way out of the European Union on Friday morning. Government bond spreads on Friday echoed those during the eurozone sovereign debt crisis. The gap between Germany and the periphery has opened up like the chasm that has developed between UK voters and the political establishment.

Capital markets have been hit by a cataclysm, the worst political shock since 11 September 2001 — though the immediate effects on financial markets may not be as grave as those of the 2008 financial crisis, because the solvency of banks is not in question.

Market indicators suggest the UK will vote on Thursday to remain part of the European Union, with riskier assets outperforming safe haven instruments — meaning the public sector bond market could reopen next week.

The first of three political risks to the stability of the capital markets faced passed without causing disruption this week, as a mechanism attributed with calming fears amid the eurozone sovereign debt crisis was declared legal.

International institutional investors showed no signs of ‘Brexit’ jitters this week as the last of the sovereign's syndication before the European Union referendum drew a record book of more than £15bn.

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China had no problem selling its first offshore renminbi bond outside of Hong Kong as a strong showing from central banks pushed the deal to be more than twice subscribed.

China attempted to position its upcoming offshore renminbi sovereign bond as a sign that markets have full confidence in the country’s economy at a launch for the deal at a ceremony in London today.

UK investors showed no jitters on Tuesday about a potential UK exit from the European Union, as the sovereign’s last syndication before the EU membership referendum drew a book of more than £15bn — a record for an inflation-linked Gilt syndication.