German bunds trade flat as UK starts voting on referendum, investors eye results

The German bunds were little changed on Thursday, with traders focusing on Thursday's referendum on whether Britain will remain part of the European Union.

It is expected to stay in the middle of a 0.00 to 0.10 percent range on Thursday. Then on Friday when the main European risk event of the year comes to a head, we see the Bund yield to move up into a 0.10 to 0.20 percent range if the vote is to Remain in the UK, and fall back below zero, to -0.05 percent upon a Brexit decision.

Meanwhile, the yield on the benchmark 10-year bonds, which moves inversely to its price hovered around 0.06 percent mark, yield on super-long 30-year bonds rose 1/2 basis point to 0.659 percent and the yield on short-term 2-year note also remained steady at -0.577 percent by 09:00 GMT.

Second EU referendum voting has officially begun in the United Kingdom at 6:00 GMT. Voting will continue for next 15 hours and will end at 21:00 GMT with the result likely known around this time tomorrow (between 06:00 to 07:00 GMT). The market is not likely to move much throughout this period, however, there could occasional volatility spark due to low volume and position shifting.

Interestingly, in 1975 PM Harold Wilson called a referendum for the first time after considerable opposition rose from within the country on the UK staying with the European Economic Community, the precursor of the EU. But, with 67 percent of the voters voted to remain in the EU, UK stayed in.

The recent polls showed the outcome of the referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc. A latest online poll by YouGov showed 51 percent has voted in favour of 'Bremain', while remaining 49 percent voted for a 'Brexit'. Also, a poll by the YouGov, 35 percent say its 'risky' to stay in the European Union, while 53 percent say it is 'safe' to stay in the EU.

Another UK phone poll by ComRes indicated 48 percent Britons voted to 'Remain' in the European Union, while 42 percent voted for 'Leave'; rest remained undecided.

Interestingly, according to Betfair the probability of the Remain camp winning in today's UK referendum has increased by 78 percent, according to a response from the latest campaign polls.

On the other hand, last-minute UK poll from TNS showed 43 percent favouring Leave and 41 percent Remain and a new UK (online) poll by Opinium showed 45 percent favouring leaving the EU and 44 percent in favour of remaining. This represents a shift to a pro-Brexit balance from pro-EU balances previously.

On Wednesday, a survey conducted by Germany's Ifo reveals that 61 percent of industrial companies said that a 'Brexit' would not adversely affect their business, whilst 38 percent said their business will be badly hit. Interestingly the larger companies (employing over 500 staff), 53 percent of them, replied a 'Brexit' would hurt their business, with firms in the electronics, motor vehicle and metals industries most concerned.

This follows the declaration by the BGA stating that German export growth will be crimped by a 'Brexit' and other global risks, and with the DIW having estimated that the resultant rise in export tariffs could knock some 0.5 percentage points of German GDP growth, in 2017, Germany PLC will also be hoping that the UK stays in the EU.

The German stock index DAX Index rose 1.93 percent at 10,265 by 09:00 GMT.