Sterling surged on Monday after the European Union said it had agreed to grant London a status-quo transition after it exits the bloc next year, until the end of 2020.
Michel Barnier, the EU’s chief negotiator, said the EU and Britain had agreed a transition deal and had also agreed that a backstop solution on border arrangements for Ireland must be part of a legal text of the Brexit treaty .
The pound, already up against the dollar and euro, as expectations of the deal rose, gained further after the announcement. Against the dollar, it rose as much as 1 percent to $1.4088, its strongest since Feb. 16 and the biggest one-day rise since January.
British government bond prices fell and the yield on the two-year gilt – which is most sensitive to Bank of England interest rate decisions – hit a new high since the June 2016 referendum at 0.863 percent.
A transition Brexit deal has been widely seen as paving the way for a BoE rate hike in May.
Yields on safe-haven euro zone bonds too rose after the announcement, with Germany’s benchmark 10-year bond yield up 2 basis points at 0.59 percent – a session high.
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