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Brexit Is Back

09 July 2018 by lberuti

If the credit market appeared to have put Brexit on the back burner for a while, it was back with a bang today. In the morning, the market took the departure of Brexit secretary David Davis in its stride, and even interpreted it as a sign hard Tory Brexiteers are now a minority unable to influence policy. But the mood changed when Boris Johnson, who was the face of the campaign to exit the European Union, also resigned over disagreement about Theresa May’s strategy for leaving the bloc. On Friday, the Prime Minister announced that she had secured the backing of her whole Cabinet for her Brexit proposal, and told ministers to back it or resign. But instead of benefitting from a rare show of unity, she will have once more to battle to stave off a full-blown crisis. Today’s resignations added to market fears of a leadership challenge and further UK political paralysis. As a consequence, the risk premia of UK banks were pushed wider (RBS +6bps @ 113bps; Barclays + 5.5bps @ 114.5bps; Lloyds +4.5bps @ 99bps) and underperformed other financials which benefitted from an otherwise fairly positive tone.