Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Quick note: Brexit....
Steen Jakobsen
Chief Investment Officer
Summary: EU and UK reach agreement on Brexit but PM Johnson still needs to find a way through Parliament with the DUP saying NO
- What: Brexit deal – or the skeleton of a deal – is done
- Next: EU Council Minister meeting this afternoon. Saturday votes in UK Parliament and in EU council and European Parliament (EP has veto in this case)
- Outcomes: Most likely it will pass in Europe – UK is 50/50 as of now.
- Market reaction: A Yes, will benefit Europe (DAX) more than FTSE as the UK still have to deal with extremely negative credit impulse – we maintain underweight UK currency exposure, but with no live position for now.
- Conclusion: This does not solve anything – it buys time, and in best case it offer some short-term clarity. If deal fails in Parliament we face General Referendum and another dead-line end of January, i.e: The never ending story..
Recommended Twitter accounts to follow:
- Laura Kuenssberg (BBC) @bbclaurak
- Katya Adler (BBC) @BBCkatyaadler
- Lisa O'Carroll (Guardian) @lisaocarroll
- Mehreen (FT) @MehreenKhn
- Sky News @SkyNewsBreak
- Leo Varadkar (Irish PM) @LeoVaradkar
Links: FT Live and Guardian Live
The deal done is effectively one where everything is delayed by four years vis-à-vis Northern Ireland, NI:
Short-version of below: NI will under both EU and UK law next four years, then they will have vote decide what to do. In spirit this is violation of Good Friday agreement, but one the Tory party is willing to do in order to “normalize” situation.
For now: Labor and Lib. DEM calls this deal – “worse, than the May deal….”
EURGBP briefly dropped to a five-months low at €0.8575 before reversing higher to trade up on the day.
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