Robeco: Italien: Senat verabschiedet Renzi´s Kernreform

Main market events

Peripheral bonds performed more or less in line with Germany this week. Italy outperformedother peripheral markets. Portugal suffered from unexpected long end issuance whilenegotiations on government formation are taking place. Portuguese bonds returned 3.5% thisyear, Italian bonds 3.6%, Irish bonds 1.3% and Spanish bonds 1.1%.

Italy

The Italian Senate passed the constitutional bill which drastically changes the shape andfunctions of the Senate itself and ends the so-called “perfect bicameralism”. This is Renzi’scenterpiece reform and should lead to improved political stability in Italy.

Spain

S&P downgraded the Catalan regional government’s credit rating to BB- from BB with a negativeoutlook, citing increased political tensions after pro-independence parties obtained an absoluteparliamentary majority in the Sep 27 regional parliamentary elections.

For the second time this year Spain cuts its 2015 net debt issuance, citing improved governmentrevenue. The treasury will sell EUR48 bn, while initially the target was set at EUR55 bn.

Greece

The Greek government suspends planned tax hikes in rental incomes. The bill is part of a set ofprior actions which needs to be implemented to unlock the next EUR 2bln of bailout funds.

Portugal

So far meetings between the centre-right current governing coalition and the Socialist Party toseek a government solution ended in a “completely inconclusive way”. The President will step innext week to discuss negotiation results and nominate the new prime minister.

Robeco Euro Government Bonds

We are cautiously optimistic on periphery. We continue to see the ECB’s QE program, thegenerally supportive stance of EU policy makers towards the periphery and the improvement ingrowth as positives for peripheral debt. On the other hand risk aversion in wider financialmarkets (related to EM, commodities and weaker global growth) can weigh on the periphery.The fund has an overweight in Portuguese bonds and Spanish bonds versus Italian bonds asPortugal benefits disproportionately from QE and Spain’s recent underperformance due toelection concerns is overdone. The fund maintains its overweight in 10-year Irish bonds.Peripheral bonds make up 34% of the fund. Year-to-date the fund’s absolute performance is1.41%.

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