The memory of Britain's referendum on European Union membership in late June - when the vote to leave confounded the polls - is still fresh in investors' minds. "The outcome of the US Presidential election is of far greater global significance than the UK referendum on EU membership, but the Brexit vote nonetheless may prove instructive as to the short-term market reaction to a Trump victory," said David Riley, head of credit strategy at BlueBay Asset Management.The yield on Germany's 10-year bond was at a one-week high of 0.19 percent on Tuesday, up 4 basis points on the day. The U.S. equivalents also struck one-week highs, up 4 bps at 1.87 percent.But markets have been taken by surprise before. German 10-year government bond yields rose 17 bps in the week leading up to Britain's June 23 referendum on expectations it would vote to stay in the European Union.When the result went the other way, yields plunged 30 bps on June 24 to hit a trough of minus 0.17 percent, then stayed in negative territory for more than two months.Bund yields have risen in recent weeks, and are now more than 30 bps higher than the September trough of minus 0.16 percent, but that is partly driven by fears that central banks are stepping back from the aggressive stimulus of the past few years.If Clinton wins as expected, though, this trend is likely to continue. "Even if Renzi manages to stay in office, I think he will be a lame duck and may struggle to get anything done until the next election," said Lenz.

Source: Economic Times November 08, 2016 17:54 UTC