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Bond Mechanics in a Negative Interest Rate World

Daily Recap

The carnage continues today as aftershocks from the U.K.’s vote to leave the European union reverberate across financial markets.


Ultimately, what the Brexit vote did was inject a huge amount of uncertainty and confusion into the markets. Investors hate uncertainty, and their natural reaction is to hit the sell button.


Markets in Europe fell between 3 and 4 percent, but that trend was bucked by most equity markets in Asia. China's Shanghai Composite gained 1.45% and Japan's Nikkei did better, up 2.4%.


Here in the U.S., the selling continued with the Industrials falling 260 points. The Transports lost an alarming 3.1%, while the broader S&P 500 was down 1.81%. Treasuries and gold both rallied, benefiting from the exodus out of stocks. The yield on the 10-year Treasury fell to 1.45% and gold gained $5/ounce to close at 1324.



Bond Mechanics in a Negative Interest Rate World

By Matthew Kerkhoff


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