BlackRock flags Brexit bond alert

Global bond yield fears surface ahead of the UK's vote on EU membership, in a report from the world's largest fund firm.

Global bond yields have tanked as central banks fear the UK leaving the European Union, according to a report from the world’s largest asset manager.

In a report released by BlackRock on Tuesday, polls point to a marginal lead for the “leave camp” at 52%, fuelling concerns for bond yields. UK voters go to the polls on Thursday 23 June 2016.

The fund firm’s global chief strategist Richard Turnill explained that Brexit concerns have added pressure to maintain loose central bank policy which has driven global bond yields lower.

He said: “10 year US Treasuries are approaching lows of 2012 and Germany has joined Japan with negative 10 year yields.”

Two year government bond yields in Japan have been on a gradual decrease for the past three years now, while yields in the United States have only recently started to decline.

According to the BlackRock analysis, should Brexit occur, the Bank of Japan will likely be more concerned with stabilising their own currency, as opposed to taking action on their declining bond yields.

BlackRock’s global chief investment strategist said the European Central Bank appears to have no inclination to change policy, regardless of the cataclysmic effect of this potential forthcoming Brexit.

The US Federal Reserve is trying to balance sustained consumption growth and rising inflation pressures against the global growth risks.

Economists believe that, with slowing job growth, we can only expect one, or perhaps two, Fed rate increases this year.

Reports released earlier today (Tuesday) suggest that a Brexit outcome would likely negatively impact stocks and Sterling alike.

However, a “remain” vote could provide a short-term boost to risk assets globally, according to the BlackRock report.