Post Brexit Fallout

Last week’s very strong US jobs report helped rally US equity markets to all-time highs this week and took the focus off of Brexit fears. It also put the shockingly weak May report in perspective as an anomaly. The 10 year Treasury yield rose on the slight “risk on” trade, the 10 year now at 1.48%. However, negative yielding bonds worldwide hit $13 trillion (compared with virtually zero in most of 2014). The huge amount of negative debt is pulling down yields across the spectrum, including corporates. Disney sold 10 year debt at 1.85%, the lowest major corporate debt issuance in recent memory. The massive Brexit fallout will be back in focus tomorrow as the Bank of England meets and is expected to announce a rate cut and other stimulus including quantitative easing (sounds familiar? See Bernanke 2010-2013). The danger is if the announced measures are less than market expectations, there could be some market volatility (see Bernanke “taper tantrum” of 2013). With a new prime minister in office, the markets are looking at how England will navigate this unprecedented turn of events. stay tuned

David R. Pascale, Jr.