The odds that the Federal Reserve will tighten interest rates this year has tumbled to 15 percent from 76 percent.

(Bloomberg) – Treasuries rallied for a second day as investors sought the safest assets following the U.K.’s unexpected decision to leave the European Union.

The benchmark 10-year note yield approached an almost four-year low of 1.40 percent set on Friday as uncertainty surrounding the global implications of Brexit spurred traders to slash odds for higher interest rates. The probability that the Federal Reserve will tighten this year has tumbled to 15 percent, from 76 percent odds at the start of this month, futures markets indicate. Rate outlook aside, some investors are buying Treasuries for yield pick-ups as they offer premiums over counterparts in Germany, U.K, and Japan, analysts said.

See also: U.S. insurers ‘less exposed’ by Brexit than other sectors

“The Fed clearly is very focused on external events and that’s part of reason why yields are falling,” said Chris Chapman, a trader at Manulife Asset Management in London. “It will be interesting to see how strong jobs data is next week and how the market will react to it. We will have to see how the Fed would balance that external view against further strength in data.”

The 10-year note yield dropped nine basis points, or 0.09 percentage point, to 1.47 percent as of 7:41 a.m. Monday in New York, according to Bloomberg Bond Trader data. It reached 1.40 percent on Friday, an almost four-year low.

The 1.625 percent security due in May 2026 rose 27/32, or $8.44 per $1,000 face amount, to 101 13/32.

Even with yields near a four-year low, 10-year Treasuries still offered about 50 basis points more than similar-maturity gilts, 157 basis points over German bunds and 166 basis points over Japanese government bonds.

Ten-year Treasury yields at 1.50 percent may look historically low, but they appear high compared with gilts, bunds or JGBs,” said Christoph Rieger, head of fixed income strategy at Commerzbank AG in Frankfurt. “Should the Bank of Japan see itself forced to cut further to fend off yen’s strength, this will unleash more demand from Japanese investors.

The yen surged as investors bought currencies they deemed as a safe haven after the surprise Brexit vote. Its strength fueled speculation the BOJ will ease policy further to ward off the risk of deflation.

Chaos in Leadership

U.S. officials are rushing to ease tensions between Europe and Britain over the timing of Brexit, as European leaders kick off crisis talks on Monday. Leadership challenges in the main U.K. political parties have created doubts about the capacity of the government to execute an orderly departure.

On Friday, the Fed said it’s ready to act with its global central bank partners to shore up liquidity in markets, if needed. Chair Janet Yellen said on both days of her testimony to Senate and House lawmakers last week that Fed officials were monitoring the U.K. referendum, after citing risks from the vote in the decision to refrain from raising rates the previous week.

While slashing the odds of a rate increase, futures traders now see a 14 percent chance the Fed will cut borrowing costs as soon as September.

The debt-market rally has boosted the 2016 return on the Bloomberg U.S. Treasury Bond Index to 4.7 percent, following the biggest one-day gain in the gauge since October 2011 on Friday. The benchmark 10-year note yield sank that day by the most since March 2009.

“Fed pretty much out of the picture,” Steven Englander, the New York-based global head of Group-of-10 currency strategy at Citigroup Inc., wrote in an e-mailed note. “This is part of the long U.S. bond story.”

 

See also:

Brexit’s implications for Yellen’s Fed come with a timeline

U.K. insurers reel as Brexit threatens $2.6 trillion of assets

Clash looms on Brexit as EU leaders spurn Cameron’s go-slow

U.K. backs Brexit as Cameron resigns after historic rupture

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