How big would be Brexit impact on UK, European and other economies?
Stock markets rebounded quite fast which gives the impression that the impact will be limited if any. At the same time they are not the right prism to analyse such a question.
Long term bond market is the place where investors do accurately take into account long term growth perspective. In bonds cash flows are fixed and default probability is hardly being impacted by Brexit vs. equities where there are much more moving variables.
GDP growth impacts yields mostly indirectly - central banks will grow rates slowly due to the need to adjust for lower growth.
Below is the chart of Yield change for 10 year government bonds. They were down immediately and there was no rebound. UK 10y bonds lost almost 0.6%, US and France 0.27%. These are huge moves for the bonds world.
Below is the change in UK 2017 GDP growth forecasts before and after Brexit - the drop is 1.1%
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