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    UK: Capital flight in a Brexit scenario post referendum very unlikely - MUFGSandeep Kanihama

    Derek Halpenny, European Head of GMR at MUFG, suggests that there have been no new opinion polls to determine direction for the pound, which is unchanged so far this morning.Key Quotes“PM Cameron and Nigel Farage took questions from an audience (separately) last night with no major gaffs from either side. The media is reporting data from the Bank of England, which revealed a cut in financial institutions’ holdings of pound assets of GBP 59bn in March and a further GBP 6.3bn in April, the largest reduction since the financial crisis. This is not hugely surprising and the pound on a trade-weighted basis did hit its most recent low in April.While there is natural appetite for hedging exposure to the pound, it must be remembered that the yield on offer in the UK is very attractive relative to Europe. Separate data from the BOE reveals that foreign investors were net buyers of Gilts in both March and April. With the German 10-year Bund yield falling to a new low of 0.045% yesterday, a Gilt 10-year yield of 1.27% looks attractive. Capital flight, even in a Brexit scenario post referendum seems very unlikely to us.”

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