(Reuters) - Investment bank Goldman Sachs said on Monday that a near-term Brexit resolution could send British government bond yields at least 20 basis points higher and have a knock-on impact on other bond markets too.
Goldman told clients that a UK-EU agreement over a Brexit divorce deal allowing Britain to smoothly leave the European Union at the end of October, “could push Gilt yields at least 20 bps higher, with contemporaneous spillovers likely worth 10 bps to German (Bunds) and 5 bps to U.S. yields.”
“The market continues to under-price the potential of an October Brexit deal, and see room for curve steepening,” the bank said. “We also expect ongoing declines in inflation forwards as Brexit risk premium declines.”
It predicts sterling to firm to $1.30 if a deal is agreed.
Reporting by Sujata Rao; editing by Dhara Ranasinghe