A Bond Trader’s Rough Guide to Navigating the Brexit Endgame
- Gilts have almost priced in Parliament backing Johnson’s deal
- Further yield increases may be limited if agreement is passed
Photographer: Daniel Leal-Olicas/AFP via Getty Images
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The bond market has almost priced in success for U.K. Prime Minister Boris Johnson as he seeks Parliament’s support for his Brexit divorce agreement, with the perceived risk of a no-deal outcome dropping toward zero.
That suggests limited scope for further increases in 10-year gilt yields -- probably less than 20 basis points in the short term -- should lawmakers vote in favor of the accord. The global growth slowdown and uncertainty over the future trading relationship with the European Union should prevent a greater sell-off in the event of a ratified deal, leaving yields stuck in a higher range.