German bonds fell upon UE referendum bets

German government bonds saw a decline as traders followed signals from betting odds that Britain will vote to remain in the European Union in Thursday’s referendum.

Germany.- William Hill, the UK’s largest bookmaker, is now offering odds of 2/9 on the UK voting to stay in Europe, equivalent to an 81 percent chance of Remain winning. Conversely, the odds of a Leave vote are now 3/1, giving a 25 percent chance that the country will vote for Brexit. On its part, Ladbrokes is offering slightly lower odds of 1/4, at 76 percent, that Britain will opt to stay, up from 73 percent on Monday, whilst it has lowered the Leave odds to 3/1 (24 percent).

In the meantime, Italy’s 10-year yield premium over Germany touched the lowest level in more than a week as German bund yields approached a two-week high. Whilst bookmaker figures processed by the Oddschecker website put the chance of Brexit at about 25 percent, the polls were more divided on whether the UK would vote to stay or leave. European Central Bank President Mario Draghi said officials were ready to act if the vote caused market turmoil and threatened price stability.

Benchmark German 10-year bund yields rose one basis point, or 0.01 percentage point, to 0.06 percent as of 4.16pm London time, after rising to 0.075 per ent Tuesday, the highest since June 7. The 0.5 percent security due in February 2026 fell 0.14, or 1.40 euros per 1000-euro face amount, to 104.19.

Italy’s 10-year bond yield dropped one basis point to 1.44 per cent. The yield spread versus similar-maturity German debt narrowed to 1.36 percentage points, the lowest since June 10. The yield on similar-maturity Spanish debt was little changed at 1.50 percent.

In the final bond auction before the UK vote, Germany sold €1 billion (US$1.13 billion) of securities due in August 2046 at a record-low auction yield of 0.65 percent.