Bonds: ECB may loosen rules governing QE programme

These were the biggest moves among the most widely traded 10-year sovereign bond yields:

US: 1.49% (-3bp)

UK: 0.87% (-8bp)

Germany: -0.13% (-0bp)

Spain: 1.16% (-9bp)

Italy: 1.26% (-11bp)

France: 0.18% (-3bp)

Portugal: 3.01% (-8bp)

Greece: 8.29% (+11bp)

Japan: -0.22% (+1bp)

Gilts saw another day of strong gains on Thursday as Bank of England Governor Mark Carney suggested that further policy easing might be undertaken over the summer.

Acting as a backdrop, and a timely reminder perhaps of the potential hurdles the country faces, ONS reported that Britain´s current account deficit was -£32.6bn or 6.9% of GDP in the first quarter, down slightly from the £34.0bn observed over the previous three months but nonetheless worse than forecasts for an improvement to -£28.0bn.

Some of the terms used by economists at Pantheon Macroeconomics to describe the current account short-fall were, "alarmingly wide", "massive", "enormous" and "unsustainable".

In parallel, ONS kept its estimate of the quarter-on-quarter rate of UK GDP growth steady at 0.4% quarter, as expected.

According to Martin Beck, senior economic advisor to the EY ITEM Club, an improvement to between 0.5% and 0.6% in the second quarter was to be expected.

On a more sombre note, he added: "However, this is likely to be as good as it gets for a while. The ramifications of last week’s vote are already starting to feed through the economy and are likely to cause growth to slow in the second half 2016.

"We would expect the current account deficit to narrow significantly from this point onwards, through a combination of the impact of the sizeable depreciation of the pound on exports and more subdued demand for imports.”

Out in the euro area periphery, Italian and Spanish bonds led gains as Bloomberg reported that Eurozone officials were studying lossening the rules governing their asset purchase programme in order to ensure that sufficient securities were available to be bought.

"The German constitutional court’s recent ruling on the legality of the ECB’s outright monetary transactions (OMT) will have dispelled many doubts as to the legitimacy of QE and could have played a role in today’s reports that the ECB is considering moving away from the capital key as a constraint on the assets it purchases. Overall, the report underpins our view that the ECB is ready to undertake additional easing over the summer," said Gizem Kara, senior European economist at BNP Paribas.