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By Andy Bruce
LONDON, June 25 (Reuters) - Britain’s government bond market will be able to handle any volatility surrounding the referendum on Scottish independence, the head of the UK Debt Management Office (DMO) said on Wednesday.
The UK debt agency acknowledged that the Sept. 18 independence vote could cause volatility, Robert Stheeman told a Euromoney conference, but he said that markets were “incredibly efficient” in reacting to such major events.
Still, the possibility of volatility around the time of the vote had encouraged the DMO to move forward a planned syndication of inflation-linked bonds to July, from September.
“Some people may be aware that we had scheduled potentially a long-dated inflation linked issue some time in September, probably later in September. We just decided, why don’t we bring that one forward,” Stheeman said.
“I‘m pretty confident that whatever the outcome is - and your guess is as good as mine - the market will be able to cope with that.”
The most recent YouGov opinion poll suggested the proportion of voters set to reject independence has risen, extending their lead.
But some analysts are concerned that a “yes” vote could make it more expensive for Scotland to borrow in financial markets.
Stheeman said British government debt prices have not suffered as investors chase yield, and that their fall instead reflected a change in the macroeconomic environment.
Global stock markets are near record highs and riskier peripheral euro zone government bond prices have gained strongly as investors search for greater returns.
“I think what we’ve seen in terms of the yield market, particularly sterling, is quite simply a completely changed outlook compared with a year ago, with the economy,” he said.
“That’s clearly impacted on our market, and actually that’s a normal process.”
Speaking on the day Britain became the first Western country to sell an Islamic bond, Stheeman also told Reuters’ Global Markets Forum, on the sidelines of the conference, that Britain’s first sukuk was probably a one-off at this stage. (Additional reporting by Ana Nicolaci da Costa and David Milliken; Editing by Susan Fenton)