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Waiting For Boris (To Deliver)

09 December 2019 by lberuti

Over the last few weeks, risky assets (FX, equities, credit,…) have all been pointing in the same direction : the Conservative Party will win comfortably the forthcoming general elections – given the recent polls conducted as recently as this week-end which gave the Tories a 10pts lead over Labour with 44% of the votes, in front of distant Lib Dems at 11%, it is difficult to argue about that – and Boris Johnson will be able to navigate smoothly the exit of the UK from the EU. If a Brexit deal looks more than probable by the end of January, the negotiations that will follow and will govern the future relationships between the parties look anything but plain sailing. There are many outcomes which would not be materially different from a hard Brexit, given the very limited amount of time that will be left before the end of the transition period in December 2020. If it is true that the rally among credit risk premia has been broad-based since the beginning of October – iTraxx Main and iTraxx Crossover went respectively from a wide of 59bps and 258bps to 47.5bps and 221bps at the close tonight -, UK names have outperformed their peers in every sector, notably among financials as per the above grapple. There is not much room for disappointment of any kind at current levels, and it is not a big stretch of the imagination to think of a bumpier road ahead.