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EGBS
10-Year GGB yields are on course to register another record close through BTPs.
- Elsewhere, some light GGB tightening vs. Bunds has been noted since last Friday’s close, which represented a multi-month wide.
- The flight to quality for Bunds given the well-documented geopolitical tensions and beta to a broader core global FI sell off would have factored in to the GGB/Bund widening through the back end of last week.
- GGBs have handily outperformed BTPs given the fiscal deterioration in Italy.
- This compares to Greece’s institutional reform, which has been widely commended, with lower tier sovereign credit rating agencies already providing Greece with IG status.
- The country may receive IG status recognition at one of the ‘big 3’ ratings agencies this evening, via S&P (current rating: BB+; Outlook Positive).
- Such a development won’t be a mover re: GGB inclusion in the major bond indices, but would no doubt be a welcome development for GGBs.
- Also note that such a move will likely trigger inflows from funds that require IG status at one of the big three agencies, which would provide further tailwinds for GGBs.
Fig. 1: 10-Year GGB/Bund & GGB/BTP Spreads
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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