Peripheries well able to cope with wider bond spreads1

摘要

1. While a four-year golden period for many peripheral Eurozone governments of rising GDP growth and falling global bond yields may be coming to an end, we doubt that we will see a sharp widening of Eurozone bond spreads in 2017. 2. Although higher yields are clearly not positive news for heavily indebted peripheral governments, our view is that the pace of increase in risk-free long-term yields will be fairly gradual this year - we expect ten-year Bund yields to climb to just 0.6% or so by the end of 2017. Such a development is unlikely to prompt markets to demand far higher compensation for the higher risk associated with holding peripheral debt.