â– Sovereign bond yields slide lower on expectations for more monetary easing
â– Stock markets recovery globally amid accommodative monetary scenery
â– FTSE 100 gains more than 7% during week, close to pre-Brexit vote levels
■FTSE’s gain still doesn’t compensate for GBP’s decline
â– S&P 500 adds 3.2%, at strongest weekly performance since November
Yields of sovereign bonds continued to push to new lows this week. Expectations for a response to the Brexit vote by the ECB translated to Europe being a predominant example for this, with the French 10 year government bond’s yield dropping from around 0.36% at the start of the week, to less than 0.16% on Friday. The Italian 10 year, similarly, saw its yield drop from 1.58% at the start of the week to 1.23% by the end of it – For a country with a debt to GDP of around 130%, which is not Japan, that’s impressive. More benchmark sovereign yields such as those of the U.S. and Germany entrenched in their current low levels, signaling what’s likely to evolve to another skirmish or so of the currency war. Due stagnant sailing for monetary policy also translated to a substantial unwinding of the Brexit vote’s aftermath. The Euro gained close to 0.2% vs. the U.S. Dollar, recovering some of the 2.3% that it lost on the previous Friday, due to the Brexit.
Equities, however, were the real gainer this week with a sizeable 2.3% weekly gain recorded at the DAX, owing to a 3.5% Wed-Fri rally. In the U.K., the FTSE 100 increased no less than 7.15% during the week. This lead the index to about 5% higher than it were before the Brexit vote, though considering the 10% or so depreciation of the GBP vs. the USD at that time, it’s hard to call the nominal gain a great achievement. U.S. stock markets, alternatively, proved a great Brexit investment. In addition to the strengthening of the USD last week, the S&P added a cool 3.2% this week, its strongest performance since November, securing the index back to its pre-Brexit vote levels.
