This will lead to pressure on European stocks and credits as well
as peripheral bonds (e.g. Italian government debt) because of lower growth and job losses.
European bond markets initially welcomed the deal made at the July summit, although the narrowing of spreads for
peripheral bonds over German Bunds was relatively muted, perhaps signaling a measure of skepticism among investors about the ability of the eurozone to survive in the absence of a formal mechanism that ensures the sharing of liabilities among member states.
We'd
expect peripheral bonds to sell off quite considerably and anticipate questions about whether Brexit sets a precedent for other countries to consider their future in the EU.
It is also likely that the remaining credit spread of Italian, Spanish and
peripheral bonds over German bunds is also cyclical.