British government bonds could make for a splendid short opportunity after the British vote to exit the EU, according to one macro trader.
"What nobody's talking about is the U.K. is the most indebted nation in the G-20 universe. It has a current account deficit of 5 percent," Boris Schlossberg of BK Asset Management said Monday on CNBC's "Power Lunch." "That will go to 10 percent, which means the U.K. bonds, now trading at around 1 percent yield, are going to be worthless."
Schlossberg's point is that as the British fiscal and economic outlook deteriorates post-Brexit vote, yields will need to rise, meaning prices will have to fall.
"It's one of the best shorts in the world right now" provided that Britain actually leaves the European Union, Schlossberg said.
The Bank of America Merrill Lynch rates and FX research team made a similar point in a note Monday, arguing that the potential "loss of the overseas bid" for British bonds will greatly hurt prices.
The fall in British bond prices could greatly hurt the European banks that hold them in their own balance sheets, which Schlossberg says is the reason financial stocks have been hit so hard.
Evercore ISI technical analyst Rich Ross said the charts look awful.
"We're as low as we were at the depths of 2012 European banking crisis. That's a bad place to be," Ross said. "You're even lower than you were in the financial crisis in 2008 and 2009. So it's not Lehman Brothers, but it's actually worse to a certain degree when we're talking about Europe."
"Sure, there's a modicum of support here, but the price action doesn't give you a lot of confidence that European banks are going to hold and rally off of this key support," the technical analyst added.