Brexit possibility thoughts

What are people's thoughts on this wrt bonds - regardless of the politics, if leave were an outcome do people thing it will have much impact? I have trimmed equities back since last summer and have say 20% bonds and currently not inclined to do too much but having a think about it

Comments

  • They seem pretty steady. My guess would be they would stay the same with a remain and the risk might be to the downside with a brexit. After a brexit, if the pound comes under pressure and they couldn't defend it with interventions in the currency market, they'd be forced to rise interest rates. I think that would send bonds down.
    Remember, they have suggested it will take 2 years to sort out us leaving the EU, so things are are a bit hard to predict.
  • I reckon that should we leave the EU then there will be a strong move to 'risk off' trades so equities down and bond prices (esp. govts) up. That's not to say that these moves will last a long time but they might be quite savage in the first week or two.
  • If you look at the skew in retail bonds towards the property sector, the impact of Brexit here could be hard. Bearing in mind that Brexit has implications for the City of London in terms of passporting of services to the EU, this could have a serious effect not only on bonds associated with financial institutions but also the London property market since this is driven to a large extent by city bonuses, etc. Of course the volatility following a Brexit will be dramatic - that's a given - but it would be foolish to dismiss the possibility of serious long-term negative consequences of Brexit as scaremongering.
  • edited July 2016
    According to this story in the Times, passporting will not be a problem, due to the updates to the Markets in Financial Instruments Directive. MiFID II, that come into force in January 2018.

    Big banks ‘will not have to quit the UK’
    International banks will not have to move thousands of jobs away from London and will still be able to do business with the rest of Europe despite Brexit, according to legal experts.
    Contrary to warnings that London’s financial sector will be crippled by the UK’s decision to leave the European Union, some believe that it will not make much difference.
    The debate centres on the “passporting” rule that allows financial institutions to base themselves in one EU country and do business in any other. Large banks such as Goldman Sachs, Morgan Stanley and JPMorgan Chase have warned that they may have to move thousands of jobs from the UK to cities remaining within the EU, such as Frankfurt or Dublin, if they cannot use London as their hub to serve clients across the Continent.
    Some senior City lawyers believe that their warnings are misplaced, as international rules that come into force in January 2018 should make it straightforward to gain passporting rights, even if the UK has left the EU.
    Those rules are part of the update to the Markets in Financial Instruments Directive. MiFID II is part of the drive by European authorities to make markets stronger and more transparent in the wake of the financial crisis.
    Barney Reynolds, a partner at Shearman & Sterling, said that under MiFID II countries would gain access to passporting as long as their rules were deemed to be “broadly equivalent” to those of the EU.
    “It is almost inconceivable that an equivalence determination will not be automatic, given the UK’s laws will be identical to those of the EU,” Mr Reynolds said. The United States, Hong Kong, Singapore and Canada are among countries considered equivalent under existing rules.
    Sceptics fear that European authorities may try to resist granting the UK equivalence to mete out a punishment for leaving the EU and to enhance the chances of France or Germany gaining financial services business from London.
    http://www.thetimes.co.uk/edition/business/big-banks-will-not-have-to-quit-the-uk-78m5qd33k
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