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(Bloomberg) -- Financial markets are interpreting Stephen Bannon’s departure from the White House as a sign of stability that may help the Trump administration refocus on its economic policy agenda. Treasury futures pared gains and stocks rallied on initial reports of Bannon’s exit. Bonds saw second leg lower after confirmation from the White House, while stocks extended their rally; The yen weakened to 109.60 on the news. Here’s what analysts had to say:

• Steven Englander, head of research and strategy at Rafiki Capital
  • “It is a partial political reprieve from market viewpoint,” potentially reflecting a move by President Trump toward a more centrist position that prevents other administration officials from leaving
  • “The fallout from his comments earlier this week is making it impossible for him to take a leadership role on tax reform and other issues”
• Subadra Rajappa, head of U.S. interest-rate strategy at Societe Generale
  • “With Steve Bannon’s departure, markets are perceiving more stability in the administration and potential for resumption of risk-taking”
  • White House Chief of Staff Kelly appears to be making changes that may allow the administration to “get back on track” with tax reform, debt ceiling talks and other initiatives. “To me, that’s what’s supporting risky assets here and the selloff in bonds”
• Jim Vogel, strategist at FTN Financial Capital Markets
  • “There is nothing in the Washington trajectory at the moment that stands ready to send rates up,” Vogel said. “Markets are looking for more positives from the administration”
  • Bannon’s departure may facilitate debt ceiling negotiations. Central banker comments at Jackson Hole next week are more important drivers of rates right now, as well as inflation outlook
• Aaron Kohli, fixed-income strategist at BMO Capital Markets
  • In terms of market reaction, “it’s really more about whether the Trump Administration starts to resemble a more traditional White House”
  • Bannon’s departure could signal more stability, fewer distractions from leaks and protectionist rhetoric
  • Focus will return to whether administration can push through tax cuts, infrastructure spending or reduce regulation
  • “The execution has been terrible. Does Bannon’s exit make their execution better? I don’t know if it does. That’s the schism. The ideas are fine”
• Alejo Czerwonko, emerging-market strategist at UBS Wealth Management
  • "At the margin, one could conclude the more hawkish camp within the administration towards international trade seems to be losing ground"
  • Impact on EM currencies will be small until there is more concrete evidence of a less hawkish administration, particularly regarding U.S. relations with China and the Nafta agreement
• Steve Hooker, money manager at Newfleet Asset Management
  • "Risk markets could be seeing a lift as the probability of a more radical U.S.-first type policy implementation diminishes" 
  • That could benefit assets like the Mexican peso, which was susceptible to volatile swings on trade and immigration rhetoric

--With assistance from Alexandra Harris, Edward Bolingbroke, Elizabeth Stanton, Aline Oyamada and Ben Bartenstein. To contact the reporters on this story: Lananh Nguyen in New York at lnguyen35@bloomberg.net; Anna Windemuth in New York at awindemuth1@bloomberg.net

--KRISTIN JENSEN

--GREG SULLIVAN