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Credit Markets Were Much Less Prepared for Brexit Than Stocks

Almost no change in volatility expectations ahead of the historic referendum.
Photographer: Simon Dawson/Bloomberg

Have credit investors become so inured to years of cheap money and central bank bond buying that they simply sleepwalked into one of the biggest risks to financial markets in years? 

The credit markets shrugged off Britain's referendum on European Union membership, according to Bank of America Corp. analysts led by Michael Contopoulos. That was not a smart move given that the cost of insuring corporate bonds against default—a key measure of credit risk—rose the most since 2008 on Friday and remained elevated on Monday.