The UK will vote on June 23rd whether to stay in the European Union (EU) or to leave it. The press has dubbed it “Brexit” which is short for British Exit. The vote is taking place because British Prime Minister David Cameron made it a campaign promise in the 2015 election. He was pressured into making the promise from a growing chorus of dissent from both his own party and other groups in the UK. The United States in not the only country where political divisions run high. Brexit is a political hot button in the UK and Europe as a whole. Politicians say leaving could cause WWIII, global economic upheaval, higher mortgage rates in the UK, and put pensions at risk.

Traders hate uncertainty and dumped stocks and bought bonds ahead of the vote. The “yield” on the 10-year Japanese bond is minus 25 basis points and minus three basis points for German 10-year notes. Countries get paid to “borrow” money. There is currently $10T ($10,000,000,000,000) in debt issued by governments that yields below zero percent. The yield on the 10-year note in the US fell 17 basis points this month and currently yields around 1.62%. It is anyone’s guess what a “leave” vote will do to global stocks and bonds, however a “stay” vote would most likely result in a reversal of the sharp drop in rates. Prepare yourself and your referral partners for the outcome on the 24th.

Bottom line: If the UK leaves the European Union there will be a huge trade impact on the US and the global market as a whole. This impacts our economy, and that effects rates. Will rates fall, or rise, depends on how this impacts the trade market, and the reactions of investors as a whole, but it will create a very volatile situation for us.

– Information provided by RATELINK