Markets give big vote of confidence to Brexit

Today the cost of government borrowing for ten year money has fallen to just 1.29%. Last November and even this January before  Brexit came to dominate much market commentary the cost of UK borrowing was over 2%. It is particularly noteworthy that as the chances of Brexit have risen in the polls and in the betting, so the cost of UK state  borrowing has fallen.

This is of course the opposite of the predictions of the Treasury and the US investment banks. They have been wrong again. UK public finances will obviously be sounder out of the EU, as we will no longer have to pay all that money to them. We will no longer risk being dragged into ever more expensive EU policies trying to offset all the economic damage Euro austerity does.

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  1. Chris
    Posted June 3, 2016 at 8:41 am | Permalink

    The Sun seems to be fully behind Brexit and the “leader” today is spot on. There is definitely more work for the Leave campaign to do:

    No safe option
    THE pro-EU lobby hope to coast into the referendum without being challenged on the risks of staying in. It must not happen.

    Remain insist their position is the ­status quo, that the only economic uncertainties are in leaving. As The Sun has said, and as the commentator Allister Heath argues on this page, that is nonsense.

    The EU is in crisis on multiple fronts…………”

    • Mark B
      Posted June 3, 2016 at 11:56 am | Permalink

      This is why I asked our kind host to talk more about what life will be like in the EU if we stay.

      It is not an IN or OUT question. It is; “Do you wish to be a sovereign nation once more or, a vassal state of the EU ?”

      And people need to know that IN means greater taxation as the EU needs money and all the other member countries apart from Germany have none. It means greater immigration and more pressure on public services. It means more red-tape and regulation, which stifles competition and increases costs. More stagnation, as the rest of the world becomes more competitive and out performs the rest of the EU.
      More decline, as the above creates regressive ever more burdensome government interference.

      The more the people know what is in store for us should we remain, they will vote to leave this loony bin.

      OUT !!!!

      • Leslie Singleton
        Posted June 3, 2016 at 2:33 pm | Permalink

        Dear Mark–Cameron admittedly has the gift of the gab and is very effective when he has something truthful to say; but that tends to slide in to easy and knee-jerk prevarication and lying when he thinks he can get away with it, which, conceited as he is, is often. Last night was his chickens coming home to roost and was a delight to watch, just as the front page broad headline in the Torygraph this morning was a delight to read. The latter made up for the fact that Costa had run out of bacon rolls.

  2. Ian Wood
    Posted June 3, 2016 at 8:46 am | Permalink

    People want to lend money to government for very little return because they fear there is going to be market chaos in the event of Brexit. As for public finances, they are not going to be sound once tax revenues start falling as GDP declines through no longer being able to access a tariff-free single market. Are you in favour of an Australian-style migration points system, incidentally? Brexit will lead, on the most reliable information we have, to market chaos, collapsing public finances, higher unemployment, and higher immigration.

    • Anonymous
      Posted June 3, 2016 at 11:13 am | Permalink

      Ignore Ian Wood.

      Best work on the facts we have *today* and not suppositions about *tomorrow.*

      Today – the EU is an economic disaster zone

      Today – the EU ignores the democratic will

      Today – our borders are broke and immigration at record levels

      If the EU was any good *today* the country wouldn’t be torn down the middle and we wouldn’t even be having a referendum.

    • Know-dice
      Posted June 3, 2016 at 12:14 pm | Permalink

      “Brexit will lead, on the most reliable information we have, to market chaos, collapsing public finances, higher unemployment, and higher immigration.”

      It seems like this is what the Government, Merkel etc. want you to believe. This will only be the case if they CAUSE it to happen.

      After Brexit is our esteemed leader and the other politicians going to willing destroy the UK?

      If they are, are you sure that this is a “club” that you want to be blackmailed by and remain part of?

    • Denis Cooper
      Posted June 3, 2016 at 1:09 pm | Permalink

      It’s rather amusing that straight after he’d been here to give us a lecture Obama went off to Germany where he warned against trade being be used as a political weapon, when apparently the Remainders he had come here to support all believe that the Germans would seek to use trade as a political weapon against us, and yet at the same time they want these people they see as being nasty foreigners to have a large say in the government of our country … none of it makes sense.

    • David Price
      Posted June 3, 2016 at 6:02 pm | Permalink

      There is no single market for services yet (if ever) and according to a study by Prof Minford the EU costs us 6% of GDP pa so I don’t think you can call the EU a tariff free single market. We are paying them to export to us at inflated prices.

  3. Tony Hart
    Posted June 3, 2016 at 9:41 am | Permalink

    Keep going with your very relevant comments. UK is heading for a recession, whether we are in or out of EU. Why do we have a £60bn trading deficit with EU? Have you any idea how much Services bring into UK from EU? I could keep going for ever!!

    Used to live in Wokingham in Glebelands Road, early Sixties.

    • alan jutson
      Posted June 3, 2016 at 10:56 am | Permalink


      “…….Used to live in Wokingham in the 60’s…’

      You would not recognise this once lovely Market Town now.

      Over developed beyond belief, infrastructure a nightmare for many hours of the day.

    • Lifelogic
      Posted June 3, 2016 at 11:10 am | Permalink

      We have a huge PSBR, a record peacetime trade deficit (overall) and a socialist, economically illiterate, chancellor. One who thinks mugging peoples pension pots, destroying savings, introducing a new sugar tax, having centrally dictated wage controls, attacking on landlords and tenants and overtaxing, over borrowing, remaining in the dysfunctional EU and pissing money down the drain on green crap etc. are very good ideas.

      He must go on June 23.

      • Lifelogic
        Posted June 3, 2016 at 12:12 pm | Permalink

        Just replacing Osborne with someone sensible (perhaps even with someone who is genuinely “a low tax Conservative at heart”) will give us a huge economic boost on top of the leaving the EU and bonfire of red tape boost.

        • Jerry
          Posted June 3, 2016 at 7:13 pm | Permalink

          @LL: You want low taxes, so what government spending are you going to cut/scrap, presumably your loathed ‘Green Crap’ and DfID, what else?…

          Bare in mind that (unless you are secretly a Corbyn supporter…) you wish to to see a Conservative government re elected in 2020 -if not before before, even more so if there is a substantive change in leadership/policy. Also that anyone can write a budget they know they will never need to enact, although after the LibDems experience 2010-15 I suspect even the three legged political also-ran horses are more cautious now, they might just end up in coalition and have the doting supporters expect deliverance!

    Posted June 3, 2016 at 10:17 am | Permalink

    Oh I don’t know the extent to which Brexit may have on certain headline financial figures. Certainly four times as much betting money now, according to the bookies, is being placed on a Leave vote.

    But the Remain Camp and the BoE automatically conflate any uptick to an increase in Remain sentiment, that and throwing a bag of chicken bones in the air to see how they land. If they all fall to earth it means we should remain in the EU. It’s their main economic indicator.

  5. Mitchel
    Posted June 3, 2016 at 10:27 am | Permalink

    I see Osborne has got Jamie Dimon of JP Morgan to join the fray this morning;there can’t be many more names left to tick off the Davos-Bilderberger cocktail party list.

    • Lifelogic
      Posted June 3, 2016 at 12:16 pm | Permalink

      Indeed difficult to take (national wage controls) Osborne seriously, he still claims he is keeping his IHT promise of £1M IHT, when he is clearly doing nothing of the sort.

      As E Powell might have said, has the Right Hon Gentleman taken complete leave of his senses?

      • cornishstu
        Posted June 3, 2016 at 8:14 pm | Permalink

        LL not that I care much for Osborne, but having just gone thru the probate process for my late father, If everything is left to the spouse there is a 1 million Iht limit which is probably what he is relying on if called to task, the fact that if you wish pass on to you offspring or any one else it is only 325K is a little disingenuous to say the least .

  6. Stewart Watts
    Posted June 3, 2016 at 10:51 am | Permalink

    Ian Wood completely correct above – government bond yields went down this week (prices up, yields down) after this week’s phone-polling showed a lower chance of Remain. The market expects Brexit to lead to uncertainty, lower GDP growth, even lower chance of hitting the inflation target, and the MPC consequently keeping rates lower for longer. The best instrument to hold in this event is government bonds. Look at how the FTSE took a dive after the polling was released.

    There are many “pro and con” arguments for both Leave and Remain, but interpreting the market piling into Government bonds as a vote of confidence in Brexit is incorrect.

    Reply The Remain campaign has forecast higher interest rates and said in terms it will mean the government having to pay more to borrow. Just admit they are wrong again.

    • Mark B
      Posted June 3, 2016 at 12:06 pm | Permalink

      I do not care about the bloody markets. I care about the rule of English Common Law, freedom and democracy. What price do the Markets have on those ?

      To answer my own question, if you look through history, people have had to pay with their lives for the above. All people like me are asking, is to put an ‘X’ in the box marked “Leave / Out / Exit” and suffer the possibility, repeat, possibility of some small financial pain. We will get it back once we no longer suffer having to be taxed for the temerity of being successful, to the £1.5bn.

      • Stewart Watts
        Posted June 3, 2016 at 11:27 pm | Permalink

        I would say that you should care about the markets. The rhetoric on both sides of the campaign is largely based on unprovable assertions, however if a small move away from Remain in a poll can cause a reasonably noticeable negative-sentiment move in markets then surely it’s a sign of more dramatic moves to come should we vote out.

        That said I completely hear you on the first point, I have no love for any European institutions, and I totally agree that there probably is some level of short-term GDP hit that the populace would be willing to take to restore full decision-making ability back to the UK. I guess my concern is whether we are Scotland from 18 months ago; namely our larger neighbour is fed up of our decades of moaning and won’t hesitate to make life tricky for us should we leave. I should declare some personal self-interest in Financial Services; while I know it’s true that the sheer numbers of active & qualified staff across all levels of this sector in the UK means there’ll be a degree of inertia as regards it moving elsewhere, I also know how nimble and ruthless these firms can be if there’s any chance of a hit to their bottom line. France, Germany and Netherlands (especially the latter given its 90% English fluency) all stand to gain from inhibiting us from selling Financial Services into Europe, and whatever anyone’s views on the morality of the sector it’s undeniable that it would be a difficult tax base to replace.

  7. Beecee
    Posted June 3, 2016 at 10:55 am | Permalink

    The currency market will have already factored in any possible downside of Brexit even if there may not be one; or it is in the process of doing so. It is what it does!

  8. Bert Young
    Posted June 3, 2016 at 11:10 am | Permalink

    Who’s surprised ! . Investors in the money market know where there is security ; they are not interested in the predictions of economists , the IMF or the OECD .

  9. Lifelogic
    Posted June 3, 2016 at 11:14 am | Permalink

    Indeed the markets are right. We are far better off away from the risks of more EURO bail outs and the break up of the EURO disaster.

    Far better off without the huge EU fees and the endless bonkers red tape.

    Far better off with accountable, democratic, nimble government and a bonfire of red tape.

    Far better off with only the higher quality immigration.

    • Lifelogic
      Posted June 3, 2016 at 1:40 pm | Permalink

      Far better of with half priced electricity too.

      • hefner
        Posted June 3, 2016 at 7:10 pm | Permalink

        At the beginning of 2015 before the support for the wind and solar energy was cut down, this support amounted to roughly 5 percent of the cost to the individual consumers. Lifelogic, even after Brexit, how are you going to get half priced electricity. It is because of clowns like you that some people cannot take Brexit seriously. Please calm down!

        • Lifelogic
          Posted June 5, 2016 at 8:12 pm | Permalink

          It is half the price in the USA.

    • hefner
      Posted June 3, 2016 at 5:30 pm | Permalink

      It might be even better if the UK were to produce more of the “higher quality population.”
      “The greatest obstacles to faster growth for the UK lie at home. A patchy education system in which only one in five children studies maths after age 16, a grotesquely distorted housing market, a lack of investment in national infrastructure, or misdirected investment”, all these “handicap Britain in raising productivity, wages and growth.”
      How comes that the UK cannot produce enough GPs and other medical staff, and that the best of the maths and physics graduates (and above) for a large part go to work for the financial services.
      I cannot accept Prof. Minford’s view of a world where the UK only relies on services for its wealth. He might have had a vision as one of Mrs T’s advisors in the ’80s, but things have changed in the last 35 years.
      And there certainly is no need to take his present prescriptions as if coming from The Good Book, as some on this blog tend to do.

      • David Price
        Posted June 4, 2016 at 6:21 am | Permalink

        Higher maths is not a key marker of a valuable potential or contribution. For example the video gaming industry generates significant revenue and draws from many backgrounds and interests and is even attracting the more literary types away from film and theatre.

        Besides, if we need more product development and manufacturing here we need to encourage and train the more practical individuals yet the budgets for science and D&T in schools have been eroded to the point that only demonstrations rather than practical involvement are feasible.

  10. stred
    Posted June 3, 2016 at 11:14 am | Permalink

    Being away in strife torn France for a week, I missed British news. Catching up I see that Lord Bourne ( another unelected VIP I had never heard of) has warned us that Brexit would have a negative effect on our efforts to eradicate climate change.

    I found the article below later with news that DECC and the Climate Change Committee are actually planning negative carbon emissions by 2050 or in other words -sucking CO2 out of the air and using biofuels to do it. This is despite no carbon capture mechanism having been made to work economically so far anywhere. Reading down, the biofuels are to be imported and otherwise grown by using about a third of food productive land.

    It sounds like Brexit may be an even better idea if it means getting rid of lunatic schemes like this and the Lord Bournes of this world.

    • stred
      Posted June 3, 2016 at 12:06 pm | Permalink

      The Committee on Climate Change report is attached. Note the final pages deal with compliance with EU policy and the plans are referred to as’cost effective’. The committee members include a Mr Johnson who, as director of the independent fiscal studies institute, also recently averaged all the reports from international institutes and banks, most of which depend on EU money, and ignored the reports such at Capital Economics which do not.

      • stred
        Posted June 3, 2016 at 10:00 pm | Permalink

        Note the CCC report cites current sea level rise, wheras tidal gauges do not. The ‘acceleration’ in rise is down to satellite measurement from thousands of miles away. Note also that the committee members are almost all economists and politicians. No geologists present.

        An interesting series of questions to be answered here. Meanwhile we are approving a huge increase in windfarms in stormy waters likely to last less than 20 years and an increase in tree burning power stations using 4.5m tonnes of American pellets to 13m tons, although Drax is refusing to use the late Prof Mackay’s calculator, which showed that no CO2 may be saved.

    • Jagman84
      Posted June 3, 2016 at 12:16 pm | Permalink

      What does Lord Bourne intend to do as an encore, after he has ‘eradicated climate change’? Stop the tide from coming in? He should be renamed Lord Canute. He’s an utterly deluded man.

      • Lifelogic
        Posted June 3, 2016 at 1:44 pm | Permalink

        Indeed how can you stop “climate change” it always has and always will.

        No warming anyway for 18 years. How many more years of no warming will it take before the alarmists and the BBC admit they were “exaggerating” a little? Or will they just claim the sorted the problem.

        • hefner
          Posted June 3, 2016 at 7:20 pm | Permalink

          You should look at the presentation by Judith Curry to the Society of Petroleum Engineers, on her blog ClimateEtc dated 9 May 2016.

          The argument is so much better than your usual comments based on nothing more than what you read in the DM, of which most of them are wrong.
          If you want to make the point there is no need for spending billions on climate change, have proper arguments. Otherwise (once more) you will be taken for a clown.

          • stred
            Posted June 4, 2016 at 8:34 am | Permalink

            The comments about pointless wind and biofuels are based on the links given which are from green journals and the DECC/CCC report. Why don’t you read them and not be taken for a clown by the energy subsidy milkers.

            Also listen to the last interview with the Late Prof David MacKay in which he finally says that if we have to build nuclear power to provide the base reliable electricity, which will power transport and heating too, – then we may as well just run them all the time and not bother with the wonderful windfarms and burning US trees. Here is the world’s most respected energy expert and previous DECC advisor telling us that the policy is wrong.

            Apart from Hefner, how many other clever people are ignorant about the truth?

  11. ian wragg
    Posted June 3, 2016 at 11:28 am | Permalink

    We are heading for recession anyway. On our estate houses are selling like hot cakes and the prices have risen dramatically in the last year. I fear some people are going to be left feeling very silly when the correction comes.
    So JP Morgan may have to relocate some staff away from London in case of Brexit.
    Probably a good reason to vote for leave just to annoy them a G. S.
    Does anyone believe that sending poll cards to people not entitled is an accident. It’s funny how everything “accidental” is on the Remaniacs side.

    • Lifelogic
      Posted June 3, 2016 at 1:49 pm | Permalink

      Indeed and students getting two at both home and uni too I hear.

      How is Cameron’s election expenses investigation coming on?

      He could have won two elections properly with real margins and within the laws, had he actually been a real low tax, EU sceptic Conservative.

    • hefner
      Posted June 3, 2016 at 5:42 pm | Permalink

      Re. Poll cards: About 3600 have been sent to EU nationals by mistake. There were about 46 million voters in the 2015 General Elections. Even if all these 3600 were to vote for Remain, it might have a 0.008 percent impact on the result. No need to fret.

  12. Jerry
    Posted June 3, 2016 at 11:32 am | Permalink

    But John I thought you said in the past, when those wanting to remain in the EU were suggesting that the then market falls were due to fears over Brexit, that we should not take what the markets do as an indication either way?

    This whole campaign needs to be mounted on a church spire, both Brexit and Remain are acting like weathervanes (almost always forecasting thunder, lightening if not total damnation) rather than signposts!

    Reply I am refuting the lies of Remain who forecast a rise in interest rates and we have the opposite. I do indeed think Remain exaggerate the impact of Brexit on markets.

    • Anonymous
      Posted June 3, 2016 at 1:38 pm | Permalink

      Jerry – We are actually seeing for ourselves what Remain looks like and we have demanded a referendum.

  13. bluedog
    Posted June 3, 2016 at 11:34 am | Permalink

    Good news, Dr JR, and the improvement in sentiment should not surprise. Freed from the inherent systemic risk of the Euro, Sterling becomes a premium rated proxy for European economies. The negativity of the leading investment banks reflects a political rather than an economic judgement. In order to retain their role as financiers of the government and as buyers of government assets, the banks need to toe the party line. Their comments simply reflect their self-interest rather than any profound economic insights.

  14. Denis Cooper
    Posted June 3, 2016 at 12:40 pm | Permalink

    Off-topic, an interesting little fact here:

    ”Britain buys more than double (€40 billion) the agricultural produce from Europe than it sells to it (€16 billion), something that also holds true individually for poultry, pork, beef and dairy.”

    So just as with cars we have the Remainders emphasising the importance of the EU Single Market for our exporters, while failing to mention that of course it works both ways and we actually run trade deficits.

    • Mitchel
      Posted June 3, 2016 at 2:24 pm | Permalink

      Plus the Europeans have the ongoing effects of the Russian boycott of their produce to consider.

    Posted June 3, 2016 at 2:17 pm | Permalink

    Off topic;
    Whoops Mario Draghi of the ECB seems to have got it a bit wrong.Less than 24 hours after his Press Conference yesterday. He expected the Euro to go down enabling his whatever he said he hoped would allow the EU economy to go sideways and up a tad. But the Euro has suddenly gone massively up due to the US dollar going down on a very poor jobs report in America. Of course this also means the BoE will have been wrong footed too but that’s per usual and I’m sure they’ll have a good old talk with lots of deep tones, “locksteps”, “takeaways”, with especial mention of “our mandate” and half all financial and economic data routinely not collected and not used in BoE economic models and projections because “it is not in our remit” ( clever smile ) with the Treasury Committee and talk “smart”, fast, and vacuously.
    Mr Osborne should be blamed as he always says it is he and not the EU who is in control.

  16. Martin
    Posted June 3, 2016 at 2:30 pm | Permalink

    As the media etc are distracted by the referendum you will all be pleased to know that the Home Office is continuing with its big brother database surveillance police state.

    A good time to sneak out awkward news.

  17. Iain Gill
    Posted June 3, 2016 at 2:58 pm | Permalink

    I saw bits of the Cameron interview on TV and conclude that his days as Conservative party leader must be numbered, the Pinocchio effect must be showing

    Shame the questioner didn’t have the obvious responses to Cameron’s scare that “British” cars would suffer tarrifs on export to Europe, the most obvious one being that Germany/BMW/Mercedes will still want to sell cars here so it will be in their interest to keep the trade flowing

  18. Simple Soul
    Posted June 3, 2016 at 4:05 pm | Permalink

    This contradiction in the markets about what is supposed to be happening and what is really happening applies vry much to the stock market also. The FTSE 100 hovers calmly around 6,200 level. It might perfectly well be at that level were there no referendum to worry about. In short big money is not feeling particularly nervous. And yet we are told that every economic hiccup that comes along must be explained in terms of a scared business sector putting off decisions until 24 June. As for the dip in sterling, whatever the reason, it could well turn out to our advantage, as it did in the nineties. But in the stock market at least, there is no sign of jitters beyond what is readily explained by weak profit prospects.

  19. Chris
    Posted June 3, 2016 at 4:08 pm | Permalink

    Just seen this:

    “Whether we vote to stay or vote to go, there will be uncertainties in the future. The real question is whether these uncertainties will be better handled by a British government or impenetrable, detached and distant EU institutions. I have plumped for the former option and have therefore just cast my postal ballot for Leave.”

  20. Androcles
    Posted June 3, 2016 at 4:29 pm | Permalink

    I thought that making investment decisions on the basis of how you anticipated other investors would react was a mugs game. The remain economists talk to each other and make their doom laden predictions on the basis of these incestuous discussions.

  21. Denis Cooper
    Posted June 3, 2016 at 5:43 pm | Permalink

    Verhofstadt says that with or without the UK the EU will have to change:

    “Let’s be honest: the union does not exist”

  22. acorn
    Posted June 3, 2016 at 6:59 pm | Permalink

    Having spent the last week in France, “making arrangements” shall we say, for a possible Brexit, I was surprised to find my French peer group, caring less about a UK Brexit than I thought. It must be a throw back to the Gaullism era. They basically think the UK is a square peg in a round EU hole. As far as they are concerned, they will move when the Pound Sterling starts looking a bit dodgy; which is what they are planning for.

    They give you a lot of chat about the UK wanting all the benefits of the EU machine; but, not wanting to do any of the heavy lifting to get those benefits. I must have heard, several times now, the one liner. “How do you know when the Brits have arrived at Brussels airport? You can still hear the whining after the engines have stopped”.

    • stred
      Posted June 4, 2016 at 9:46 am | Permalink

      If you don’t want to leave your French house to relations you don’t like it may be better to sell and move elsewhere. The British government have opted out of a useful EU directive allowing foreigners living in France to opt out of daft French law which divides up estates equally, even to relations who have been horrible. We are now stuck with the French system.

      • acorn
        Posted June 6, 2016 at 10:39 am | Permalink

        stred. Have a read of “

        “The UK has opted out of the regulation and so it does not apply to assets located in the UK. While that is the case, due to the way in which the regulation has been drafted, it may allow British individuals to take advantage of it and elect for UK law to apply to property located in other member States.”

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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