LONDON (Reuters) - The yield on two-year British government bonds hit its highest level in more than six weeks on Monday as investors saw a greater chance of Britain reaching a Brexit deal with the European Union after upheaval in the government.
Former Brexit minister David Davis resigned on Sunday over Prime Minister Theresa May’s new Brexit plan but he said on Monday he was not calling on other ministers to quit and that May could survive his resignation.
The yield on two-year British gilts GB2YT=RR hit its highest level since May 24 at 0.784 pct, up four basis points on day.
The yield on equivalent German bonds was down.
The spread between yields of 10-year British and German government bonds was its widest since December at 99 basis points, according to Reuters data.
Sterling also rallied by as much as half a percent but overall the market was relatively muted for a seemingly major political event, said Marc Ostwald, market strategist at ADM Investor Services.
“Markets are caught between a proverbial rock and a hard place. The political news is not good, but until you’ve got something concrete — ie. an actual event that crystallises — only then will the market will probably sit up and pay attention,” Ostwald said.
Reporting by William Schomberg and Andy Bruce; Editing by Toby Chopra