Robeco: Portugal vor schwierigen Herausforderungen

Main market events

Peripheral bonds performed more or less in line with German bonds this week, except forPortugal. The political situation in Portugal isn’t likely to be resolved soon, which might evenresult in new elections taking place somewhere next year. Portuguese bonds have returned 3.4%this year, Italian bonds 4.9%, Irish bonds 1.6% and Spanish bonds 2.1%.

Portugal

The recently appointed Prime Minister Coelho presented his government to the President onThursday and now has up to ten days to present his program to parliament. The left wing partiesalready announced they will vote down every program, in which case the government needs tostep down and the President would have to nominate a new prime minister.

Greece

Disbursement of the next bailout tranche to Greece has been delayed to November as Greecehas only implemented a third of the required ‘prior actions’ necessary for releasing the funds.

Italy

The major trade unions have threatened to strike as resources made available in the 2016budget draft for public sector wage increases are way off what they would consider acceptable.

Spain

The Catalan pro-independence parties filed a motion to begin officially the process of secessionfrom Spain and the creation of a new republican state of Catalonia. Approval by the Catalanparliament will be a clear step of raising the level of confrontation with the central government.

Robeco Euro Government Bonds

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. On theother hand risk aversion in wider financial markets (related to emerging markets, commoditiesand weaker global growth) and further political uncertainty can weigh on the periphery.The fund took profit on its overweight Spain versus underweight Italy position as politicaltensions in Spain might re-emerge in coming weeks. Currently the fund has overweight positionsin Portugal and Ireland versus underweight positions in Spanish and Italian bonds. Portugalbenefits disproportionately from QE and strong economic growth is rapidly improving the Irishdebt metrics. Peripheral bonds make up 34% of the fund. Year-to-date the fund’s absoluteperformance is 2.12%.   

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