The UK referendum decision to leave the EU may have taken markets and betting exchanges by surprise, but Credit Benchmark data shows that IRB banks have been increasingly cautious on the UK for some months.
Contributing banks re-assessed the UK Sovereign Probability of Default (‘PD’) in March, effectively downgrading the UK Government from. Today, S&P warned that “We think that a AAA-rating is untenable under the circumstances.”
Credit analysts at IRB banks became more cautious a few months ago. Although this cannot be definitively linked to the EU referendum, it followed shortly after Boris Johnson had declared his support for Brexit. This does highlight one of the many advantages of crowdsourced ‘real world’ PDs, which capture trends early and reflect the regularly updated views of a range of experts.
As many investors and gamblers discovered on the night of the 23rd June, market implied views based on foreign exchange markets and online betting exchanges can be fickle and expensive.