Sterling, US bond yield hit record lows on Brexit

Standard Life has suspended trading in its UK real estate fund

London, July 5: Sterling hit a fresh 31-year low against the dollar on Tuesday, as investors worried about the economic and financial fallout of Britain's vote to leave the European Union.

The pound, the asset that has borne the brunt of market concerns about the economic impact of the vote, slid as much as 1.3% on Tuesday to hit $1.3112, its lowest since September 1985. That left it around 12% below its levels before the June 23 referendum.

Sterling did briefly gained after Bank of England governor Mark Carney, speaking following the publication of the bank's semi-annual Financial Stability Report, said the fall in the currency should help ease the balance of payments shortfall, but it then gave up those gains to trade down 1.1% at $1.3143.

“One of the most striking things for us is the fact that he (Carney) spoke quite openly about the need for sterling to adjust to act as a stabiliser, and that its weakness was necessary...so that was actually a positive spin,” said ING currency strategist Viraj Patel.

The BoE also expressed concerns about a fall in investor demand for British assets — which could make it harder for the country to finance its large current account deficit — as well as trouble in commercial real estate making it harder for businesses to use their property as collateral to obtain loans.

Standard Life Investments said late on Monday that it had suspended all trading in its UK real estate fund, one of Britain's largest property funds, in one of the first signs of major financial stress since the vote.

The investment house, part of the insurer Standard Life, said the decision had been taken after an increase in redemption requests due to uncertainty following the ballot.

It had said last week that it had reduced the value of the fund, which invests in UK commercial real estate assets, by 5%.

Standard Life's announcement came after the end of trading in London on Monday and, with trade thinned by the closure of US markets for the Independence Day holiday, Tuesday was traders' first proper chance to react to the news.

“Risk does seem to be under some pressure today - the news that Standard Life is suspending trading in its commercial property fund is having some impact for sure, and that's contributing to the generally weaker tone in risk sentiment,” said Societe Generale currency strategist Alvin Tan.

US bond yields at record lows

Benchmark 10-year US Treasury yields hovered near record lows in early trading on Tuesday on uncertainty surrounding the economic fallout of Brexit and the prospect of a dovish Federal Reserve until at least late 2017.

US 10-year Treasury notes were last up 21/32 in price-toyield 1.389% after touching a record low of 1.377%, while 30-year bonds were last up 22/32 in price-to-yield 2.157% after touching 2.141%.

That was the lowest yield on 30-year bonds since the 1950s, Bank of America Merrill Lynch data showed.

Analysts said concerns over the impact of the June 23 Brexit vote, the potential for more central bank stimulus, and the Fed keeping interest rates on hold were sending investors rushing into safehaven US gover nment debt.

Traders were expecting the Fed to keep interest rates steady until at least December 2017, according to federal funds futures.

“Uncertainty is still very large,” said David Keeble, global head of interest rate strategy at Credit Agricole Corporate & Investment Bank in New York. Reuters

BoE governor Mark Carney