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What: Shares of Lloyds Banking Group PLC (NYSE:LYG) and Prudential Public Limited Company PLC (NYSE:PUK) are up about 12% at 3:15 p.m. ET, as the market digests what Brexit really means for European financial stocks.

So what: Prudential and Lloyds Banking Group have been among the hardest-hit financial stocks since news of U.K.'s vote to leave the EU made waves around the world.

Lloyds Banking Group has suffered from analyst downgrades relating to the company's exposure to the U.K. economy. Primarily a deposit-gatherer and lender, it's all about the macroeconomic outlook. Earlier this year, Lloyds forecast charge-offs equal to 0.2% of its loans this year, but many believe that loan losses could spike if a Brexit-induced recession strikes the U.K.

Prudential's woes are more focused on markets. Life insurers must properly underwrite risk, and invest customer premiums to generate sufficient capital to pay out on losses. In recent trading, U.K. government bond yields stabilized, with some shorter-term maturities seeing small, but positive increases. 

Now what: A rise in U.K. government bond yields was enough to send some investors back to U.K. financials, but it's hardly a sign of a complete reversal. One-year yields are down about 0.50 percentage points in the past year, while 10-year yields are down about 1.2 percentage points.

After two days of intense selling and double-digit declines, it isn't out of the ordinary to see a slight reprieve as short-sellers buy to cover, and value shoppers step in line to grab beaten-down financial stocks.

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