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Euro zone bond investors exercise caution ahead of Brexit vote

Reuters  |  LONDON 

By Virginia Furness

LONDON (Reuters) - Euro zone bond yields slid on Monday after weak Chinese data and the threat of a new election in increased risk aversion, while investors awaited further clarity from Tuesday's Brexit vote in

Asian and European shares dropped on Monday after China's exports unexpectedly fell the most in two years in December, but despite a marked cooling in one of the world's largest economies, the bid for safe haven euro zone bonds was muted.

Germany's 10-year government bond yield, the benchmark for the region was quoted at around 0.23 percent in early trade, fell around 1.5 basis points to 0.222 percent, lower on Friday's close but bolstered by new supply last week.

Rene Albrecht, a at DZ Bank, said that despite the flow, Bund trading was in "stalemate" ahead of the British on Brexit on Tuesday.

"It doesn't know if it should rally or retreat," he said. "Everyone is waiting for the vote, and afterwards will have some higher degree of certainty, which could trigger a yield rise in safe havens if uncertainty is lower."

The future path of Britain's exit from the is uncertain as parliament is likely to vote down Theresa May's deal on Tuesday. Possible outcomes include a last-minute deal, a disorderly exit, a new referendum or remaining in the bloc.

Non-core euro zone bond yields rose in early trade. The Threat of new elections in kept upward pressure on its bond yields with its 10-year government bond yield opening at 4.28 percent.

Greek on Sunday said he would call a confidence vote in his government after his coalition ally quit, leaving him bereft of a parliamentary majority and raising the possibility of a snap election.

is expected to bring a new syndication to market soon but further political uncertainty and any rise in yields may skewer its chances of a new deal in the short term.

bond yields rose around 3 basis points in early trade. Italy's on Sunday said he did not see a recession on the horizon, but acknowledged that Italy's economy could be in a period of stagnation.

DBRS on Friday affirmed Italy's rating at BBB, removing the first possible ratings hurdle of the year.

(Reporting by Virginia Furness; Editing by Alison Williams)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, January 14 2019. 14:28 IST
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