Greece and Portugal Continue To Outperform Amongst the Peripheries

Greek and Portuguese bonds continue to outperform Italian and Spanish counterparts on Tuesday, with the larger periphery countries seemingly still under pressure following Lagarde noting yesterday that the ECB would likely discuss PEPP reinvestments in the "not too distant future", which prompted some widening.

• Otherwise, there has been little in the way of domestic news flow to motivate the BTP/Obli widening seen today - though lower European equities would have aided the moves. The 10-Yr BTP/Bund spread is 3.8bps wider at 177.2bps, while the 10-year Obli/Bund spread is 1.8bps wider at 100.8bps.
• GGB outperformance was likely aided by news that they may pay E5.3bln of Eurozone bailout loans ahead of schedule, reinforcing the stronger fiscal fundamentals narrative that has supported ratings upgrades from Moody's and S&P in recent months. The 10-year GGB/Bund spread is currently 0.1bps wider on the day at 121.6bps, over 30bps tighter than widest levels seen in October.
• Fitch are scheduled to review Greece's rating on Friday after hours, where an upgrade to IG (current rating one notch below at BB+, outlook stable) would provide eligibility to most IG indices for the first time since the Euro sovereign debt crisis.