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imageNEW YORK: US Treasury prices fell on Thursday on growing confidence that Britain will vote to remain in the European Union, as new opinion polls indicated that the campaign to stay in the EU was in the lead.

A telephone survey by polling firm ComRes, conducted for the Daily Mail newspaper and ITV television showed the "Remain" campaign had a 48 percent to 42 percent lead over "Leave."

At almost the same time, another poll by YouGov for The Times newspaper showed "In" leading "Out" by 51 percent to 49 percent. A previous YouGov poll for The Times had put "Out" ahead.

Crucially, undecided voters not captured in the polls are seen as more likely to vote to stay in the EU than to risk the unknown consequences of leaving.

That has boosted riskier assets, including stocks, and reduced demand for US bonds, which had rallied on Wednesday on growing fears of a British exit.

"There's a very, very strong presumption that a lot of the undecideds are going to break towards the status quo," said Aaron Kohli, interest rate strategist at BMO Capital Markets in New York.

Benchmark 10-year notes were last down 17/32 in price to yield 1.74 percent, up from 1.69 percent late on Wednesday.

Yields had fallen to an almost four-year low of 1.52 percent last Thursday as fears over a British exit from the EU accelerated.

If Britain votes to remain in the EU, US bond investors are likely to turn attention back to when the Federal Reserve is likely to next raise interest rates.

Unexpectedly weak jobs growth in May led investors to push back rate hike expectations to later in the year, with traders pricing in only an 8-percent chance of an increase at the Fed's July meeting.

Improving economic data could lead investors to reevaluate this view, with shorter-dated notes, which are highly sensitive to rate hikes, likely to bear the brunt of any weakness.

"If they vote to stay you will twos and threes repricing, because the market will start looking towards July," said Kohli.

Data on Thursday showed that the number of Americans filing for unemployment benefits fell last week to near a 43-year low, suggesting labor market resilience.

Copyright Reuters, 2016

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