Bond traders confused over voting polls
Only 48 hours ago it appeared almost certain that the UK election would result in a hung parliament with the three major political parties fighting for control of parliament. However, over the last 24 hours there has been a surge in support for the Conservative party, a significant recovery in Labour Party support and a drop in those intending to vote Liberal Democrat in the election. As a consequence, the Labour Party has now got a new lease of life and the Conservative party could actually poll enough votes to take control of parliament.
These very different scenarios and very real prospects are causing concern confusion in bond markets which had almost priced in a hung Parliament. As we have mentioned on numerous occasions, European bond market will be open from 1 AM on Friday morning allowing traders to take advantage of early voting results. This election is still far too close to call and we could see more changes in the next 36 hours.
Whatever the final outcome there is no denying the fact that unpopular decisions will need to be taken, investment will be cut by the government and taxes will rise in the short, medium and longer term.
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