LONDON: Gilt yields increased sharply for a fourth straight session on Wednesday, hitting their highest level since the start of June as investors shifted referendum expectations towards Britain staying in the European Union.
The 10-year gilt yield peaked at 1.326 percent, its highest since June 3, but later pared gains after an opinion poll showed a one-point lead for the campaign to leave the EU just one day before the vote.
It closed at 1.31 percent, up 2 basis points on the day. Stocks and sterling also rose while safe-haven assets including gold and other government bonds slipped. Ten-year gilt yields have risen around 20 basis points since last week so there might not be a further big increase by historical standards if the "Remain" camp wins the vote, RBC economist Sam Hill said.
"In a leave scenario I think the uncertainty about the outlook, and what we think would be the probability of a (Bank of England) rate cut, could see yields fall quite sharply," Hill said, adding the 10-year gilt yield could test the 1.0 percent mark in the period after an "Out" vote.
The market is currently pricing in a roughly 25 percent chance that the BoE will cut interest rates by a quarter-point by the end of this year, which Hill said was similar to betting market probabilities for Britain leaving the EU.
British government bond yields rose across maturities on Wednesday.
The yield spread between 10-year gilts and the equivalent German Bund touched its highest level since June 1 at 126.9 basis points.
It later edged down to around 125 basis points, up almost 4 basis points on the day.
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