The strength of the bond market in 2019 is masking the differences between peripheral credits and leading to some level of convergence. Greece, Italy, Spain and Portugal have all done deals in Q1, with all enjoying healthy order books. It is a market in which few expect the European Central Bank to raise rates, given tepid growth and inflation that is projected to remain below target for years to come. Slowing growth in the EU as a whole has boosted bond markets, raising expectations for supply as governments look to plug holes in their finances. True, it means debt levels will increase further, but investors want yield, and these credits are where they can find it. That calculation looks set to persist for the foreseeable future.
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