![]() ![]() Italy may not have a government yet, but the Italy/Germany 10-year bond yield spread is near the tightest since August 2016 at 110 bps. Second, unlike a year ago, anti-establishment parties such as Italy’s 5-Star Movement are not considered an existential threat to the single currency. The euro bloc posted its fastest economic growth in a decade last year at 2.7 percent.Įven if growth slows from there, it is a far cry way from 2010-2012, when Spain and Portugal required bailouts and Italy’s debt levels spiraled to record highs. As long as growth remains healthy, we can see spreads tighten further,” said Mizuho strategist Antoine Bouvet.įirst, the three Southern European countries are well and truly out of recession, helped by 2.55 trillion euros in ECB stimulus. “There has been a regime change in sovereign spreads, which are now reacting mostly to economic developments. ![]() ![]() (Graphic: Strengthening economy underpins Italian spread - reut.rs/2KlBZQj) Their outperformance has even defied data indicating Europe’s growth acceleration may be running out of steam.Īnd despite recent volatility in the wake of Italy’s inconclusive March 4 election, spreads remain near their tightest levels in months, or even years. Italian, Spanish and Portuguese bonds have been among the bloc’s best performers over the past year, and yield premia - or spreads - over benchmark German debt have narrowed relentlessly. LONDON (Reuters) - At a time when the impending withdrawal of European Central Bank stimulus was expected to hurt southern European bond markets, so-called “peripheral” euro zone debt continues to outperform its higher-rated peers. ![]()
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