HALISTER1: U.S. Rates Vol Barely Pricing in Potential Brexit Risk: BofAML

U.S. Rates Vol Barely Pricing in Potential Brexit Risk: BofAML

(Bloomberg) -- A vote for Britain to leave the EU should be bullish for U.S. rates duration as it would drive flight to quality into USTs from gilts, BofAML strategists including Shyam Rajan in a client note.
  • Risk-off rally to bull-flatten UST curve, also likely to be positive for front-end swap spreads
  • FX reserve selling that was a large part of swap-spread tightening has now subsided; foreign demand for USTs now starting to rise
    • Expect U.S. swap spreads to stabilize or modestly widen from current levels
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Shyam Rajan (Bank of America Corp)

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