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Markets Report: Sell-off action shifts to bond markets

 

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Sterling has been under selling pressure since last week after it hit a two-month high above $1.31, and the sell-off accelerated on Wednesday as traders dumped positions across the board. Photo: Getty Images

Sterling has been under selling pressure since last week after it hit a two-month high above $1.31, and the sell-off accelerated on Wednesday as traders dumped positions across the board. Photo: Getty Images

AFP via Getty Images

Sterling has been under selling pressure since last week after it hit a two-month high above $1.31, and the sell-off accelerated on Wednesday as traders dumped positions across the board. Photo: Getty Images

The British pound plunged to its lowest levels in more than three decades on Wednesday, barring a flash crash in October 2016, as concerns about the economic impact of the coronavirus overshadowed any stimulus efforts by policymakers so far.

Sterling has been under selling pressure since last week after it hit a two-month high above $1.31, and the sell-off accelerated on Wednesday as traders dumped positions across the board.

Against the dollar, the pound plunged 2.5pc to $1.1744, its lowest level since the October 2016 flash crash.

Barring the low of $1.1491 hit then, the pound is trading at its lowest level since March 1985, according to Refinitiv data.

Against the euro, the pound weakened 1.13pc to 92.13 pence.

In Dublin, Irish shares suffered yet another brutal day.

AIB (-18pc) and Bank of Ireland (-9.88pc) were joined by a host of shares including CRH (-14.25pc), housebuiders Glenveagh and Cairn Homes, and Ryanair in seeing steep falls.

Kerry, barely down versus the previous day's close, was a rare exception.

Weaker sovereign bond markets were the major news globally, taking their cue from the equities sell-off.

As investors piled into cash, the sell-off in government bonds in particular drew European Central Bank support for the Italian debt market.

Italy's debt found itself at the centre of the sell-off with borrowing costs soaring, on track for their biggest daily jump since the 2011 eurozone debt crisis.

The rout quickly spread to Spanish, Portuguese and Greek yields.

Safe-haven German 10-year debt yields jumped to two-month highs at -0.2pc.

The yield on 10-year Irish government bonds widened out to 0.50pc.

In Europe, speculation grew around the issuance of joint eurozone coronavirus bonds or a European guarantee fund to help member states finance urgent health and economic policies.

"The liquidity situation is horrendous. What we see if liquidity is completely drying up when one-way selling starts and no one wants to take the other side," Salman Ahmed, investment strategist at Lombard Odier, said.

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