Bonds: CPI data, Brexit polls weigh on longer-dated Gilts

These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 2.20% (-2bp)
UK: 1.03% (+6bp)
Germany: 0.27% (+2bp)
France: 0.61% (+1bp)
Italy: 1.98% (-4bp)
Spain: 1.44% (-1bp)
Portugal: 2.95% (-3bp)
Greece: 5.84% (-3bp)
Japan: 0.06% (+0bp)

Gilts slumped on the heels of a stronger-than-expected print on consumer price inflation and survey results showing a majority of economists believed the chances of a 'soft' Brexit had increased in the aftermath of the last General Election.

CPI in Britain accelerated to a 2.9% year-on-year pace in May, with the core components pacing the increase, after rising by 2.7% in April.

Economists had forecast April's rate would carry through into May.

In the background, a poll from Reuters conducted among 49 economists revealed that following the 8 June UK elections, 33 of those believed the chances of a 'hard-Brexit' had "receded somewhat".

Acting as a backdrop of course, markets were waiting on the US central bank's next policy meeting the next day.

Commenting on the possible outcome of the FOMC meeting, Eric Lascelles, chief economist at RBC global asset management, said: "The Fed’s long-awaited June decision beckons. There, markets assign a 90% likelihood to another 25bps rate hike and this would be the second rate increase this year. This expectation seems about right given recent Fed statements and the reasonable health of the US economy.

"We would budget for a 'dovish' hike, however, as the Fed may be wary about over-promising future actions given a bit less economic strength relative to earlier in the year, slightly lower inflation and the absence of long-awaited fiscal stimulus. There is also an ongoing debate internally about the appropriate timing and pace of any effort to shrink the central bank’s balance sheet. This is unlikely to be resolved at the June meeting."

To take note of as well, longer-term Italian debt was again higher amid greater confidence that the risk of snap elections being called had receded after the local elections at the weekend.