Comparing Yields in Different Currencies
On Sunday Lewis Hamilton begins his quest for a 5th Formula One World Championship. When it comes to ‘Hammer time’ Hamilton tends to get things done extremely quickly, which very much suits him and his team. In contrast, the world of Brexit politics moves at an escargot’s pace.
If we look back at the timeline, the Brexit Referendum took place in June 2016, with the Article 50 legislation to withdraw then going through at the end of March 2017, which started the clock to withdrawal in March 2019. It now looks like a transition agreement will push withdrawal to 31st of December 2020, more than four years since the vote! Moreover, there are some scenarios which may even push this date out further.
From a fixed income point of view this isn’t necessarily a bad thing. Specifically, fixed income investors continue to capture a Brexit premium, see ‘Investors’ number one question’ and ‘Fishing For The Brexit Premium’ and by keeping views short-dated, they can maximise the benefits of roll down, see ‘Roll Down Explained’.
Notwithstanding the issues with increased uncertainty for all citizens and businesses affected, extending the negotiation horizon complements this strategy.
One thing is for sure, we will know the next Formula One world champion before Brexit negotiations are done!