Market pins hopes on softer Brexit; Portuguese rating in focus


By Virginia Furness

LONDON, March 15 (Reuters) - Core euro zone government bond yields edged higher on Friday, after British lawmakers voted to delay a potentially chaotic exit from the European Union, while attention turned to ratings decisions for Portugal and Italy.

Markets are now trading on expectations of a "softer" Brexit and the receding likelihood of no deal, analysts said.

German 10-year government bond yields rose slightly to end the day around 0.09 percent. Other core euro zone bond yields were about a basis point higher.

Euro zone inflation rose as expected in February, the EU's statistics office said on Friday, mainly because of more expensive services, food, alcohol and tobacco.

Credit rating agencies Moody's and S&P Global were set to review their ratings of Italy and Portugal respectively after the market close.

"No news will be good news for Italy, but not for Portugal," Commerzbank analysts wrote in a note.

Portuguese yields held near historic lows before S&P's review, which could see the country upgraded from the lowest investment-grade rating of BBB-.

Once a pariah of euro zone debt markets, 10-year Portuguese government bonds are now trading only 10-11 basis points wider than those of higher-rated Spain, at the tightest spread for at least 25 years. Portugal is rated Baa3/BBB-/BBB by Moody's, S&P and Fitch Ratings, with Spain at Baa1/A-/A-.


Elsewhere, the Bank of Japan maintained its current easing framework and guidance but downgraded its economic outlook on Friday, joining the ranks of dovish central banks.

This article appears in: Stocks , World Markets , Politics

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