By Michael Every of Rabobank
Not Transi-Tory
That was quite the Monday given there was no data to look to.
In the UK, PM BYO survived his no-confidence vote by 211 to 148, but meaning 40% of his Tory MPs did not back him. If you take out the front benchers obligated to vote for him, he didn’t even carry the majority. Just as opinion polls show the UK public wants rid of this government, but it’s still here, the Tory party wants rid of Johnson, but he’s still here – for now. However, he looks fatally wounded - “in office, but not in power.” On past form, he may well be gone within the year. Whether that can turn around the fortunes of the Tories in the next election remains to be seen. For now, more uncertainty, probably with dollops of populism to try to cover it up: what odds now a new crisis with the EU over sausage rolls?
In Israel, PM Bennett is also clinging on by his fingernails after the opposition passionately voted against a law they all passionately support, and so did some his own coalition: new elections or a new coalition there are also likely to usher in dollops of populism.
In markets, we saw a further push higher in bond yields: US 2s rose 7bp to 2.73%, 5s by 10bp to 3.03%, and 10s by 11bp to 3.04%. The 3% ceiling has been clearly breached again, and the curve is steepening. That may well have been helped by heavy invest-grade bond issuance ahead.
However, it’s also worth noting that commodity prices rose in tandem. Recall the repeated hypothesis here...