Robeco: Ireland upgraded by Fitch
Fitch upgraded the rating for Ireland to A from A-, with a stable outlook. The upgrade was based on stronger growth projections and a continued decline in the debt/gdp ratio.15.02.2016 | 10:55 Uhr
Main market events
Peripheral bonds were not resilient to the general risk off climate this week. EspeciallyPortuguese bonds came under severe pressure, as doubts over the Portuguese budget and thewillingness and ability of the new government to comply with EU rules rose. Italian bonds havereturned -0.7% this year, Portuguese bonds -7.4%, Spanish bonds -0.1% and Irish bonds 1.3%.
Spain
The Spanish budget deficit came at 4.5% of GDP in 2015, down from 5.9% in 2014, but stillovershooting the 4.2% target. Spain should reduce the fiscal deficit to 3% of GDP this year, butthis will require further consolidation measures from the yet-to-be-formed government.
Portugal
The Eurogroup found the Portuguese 2016 budget “not to be in particularly serious noncompliance”with the Stability and Growth Pact and no resubmission was needed. They didhowever highlight several risks which need to be addressed by the new government.
Italy
Italian 4th quarter GDP came out weaker than expected at just 0.1%. Especially domestic demanddisappointed surprisingly given the recent gains in consumer confidence and business sentiment.
Ireland
Fitch upgraded the rating for Ireland to A from A-, with a stable outlook. The upgrade was basedon stronger growth projections and a continued decline in the debt/gdp ratio.
Greece
The Eurogroup noted good progress in the negotiations on the first review of the bailoutprogram, while the IMF posted a critical note, warning Grexit fears could resurface again.
Robeco Euro Government Bonds
We sold our remaining Portugal exposure early in the week, before the strong spread widening.We continue to see the ECB’s QE program, the generally supportive stance of EU policy makerstowards the periphery and the improvement in growth as positives for peripheral debt. But thegeneral risk off sentiment in financial markets favors a cautious stance towards peripheral bonds.The fund has an overweight position in Ireland as strong economic growth is rapidly improvingthe Irish debt metrics, and a small overweight in Spanish longer dated bonds. We don’t hold anyshort dated bonds of Italy and Spain due to stretched valuations. Peripheral bonds make up 36%of the fund. Year-to-date the fund’s absolute return is 1.70%.