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European Bond Yields Rise As Brexit Talks Lead To Cautious Deal Optimism

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European government bond yields came off last week’s lows Monday as weekend talks of a renewed effort to “go the extra mile” buoyed hopes that a deal could be reached after all.

Michel Barnier, the EU’s chief negotiator, was suggesting that a deal could be done even this week, or it if came too late for European Parliament ratification this year, the parties could agree to a provisional deal pending a vote in early 2021.

UK gilt yields were up 2 to 5 basis points on Monday, and bond yields of top EU member countries showed a similar rise as optimism about an accord encouraged investors to move tentatively out of the safe haven of bonds. (Bond yields move inversely to prices.)

Yields on the benchmark 10-year gilts rose more than 5 bps at one point, to 0.24%. One analyst forecast the yield could shoot up to 0.45% and beyond if an agreement is reached.

Germany’s 10-year bund, less sensitive to Brexit politics, edged up more than 1.5 bps to about minus 0.62%.

Ireland, more directly affected by Brexit, saw its 10-year yield rise more than 3 bps from a record low last week to above minus 0.31%.

At the other end of the yield spectrum,

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