No-deal Brexit will hammer both UK and EU? Jay Powell fails to bend yield curve to his will


• A no-deal Brexit will be economic catastrophe for UK and the rest of EU, with Britain and Ireland taking the hardest-hit amid all.
• A study estimates that the UK alone will suffer income losses of €57bn a year if it leaves the EU without a deal. UK income is expected to fall by €873 per head, while the equivalent figure for Ireland is €726.
• Economic losses on the UK and the EU sides are expected to be especially intense in regions that are close to the other trading partner such as Netherlands.
• In the UK, for example, regions such as East Anglia, Kent and Essex stand to suffer more than parts of the country further to the north.

  • The Federal Reserve’s quarter-point interest rate cut on Wednesday failed to have the desired effect on a widely followed bond market indicator of recession.
  • The yield curve — reflecting the difference between the yields on three-month and 10-year US Treasury bonds — dropped further into negative territory, settling at minus 5.5 basis points. The measure has turned negative before every US recession of the past 50 years.
  • “The clear signal coming from the strengthening of the dollar and the flattening of the yield curve is that the market is crying out for more accommodation,” said Subadra Rajappa, head of US rates strategy at Société Générale.
  • Markets had priced in almost 100bp of cuts in the next year before the Fed acted on Wednesday. While Jay Powell called the 25bp rate cut a “mid-cycle adjustment to policy” but not a start of a series of rate cuts.