Robeco: Draghi will endlich Staatsanleihen kaufen

Peripheral markets had a strong week, helped by dovish comments from Mario Draghi on Monday and Friday. Short-dated peripheral bonds again outperformed longer-dated ones. Spanish bonds have returned 13.7% year-to-date, Italian bonds 12.7% and Irish bonds 12.5%.

European Central Bank

ECB President Draghi said on Friday that “the inflation situation has become increasingly challenging” and that the ECB would "broaden purchases if inflation risks materialize”. On Monday he explicitly said that this broadening would mean buying government bonds as well.

Italy 

Italy cancelled its mid-December debt auction due to the current large cash position. Only 2 auctions are left now for this year: November 27th and December 31st.

Spain

Spain will start a legal action against Catalan Premier Artur Mas for disregarding the Spanish Constitutional Court ruling which suspended the consultation vote on independence held November 9th.

Ireland

The Irish government reduced the water charge to households after strong protests. The introduction of this charge was one of the policies agreed with the Troika as part of the bailout program. The now agreed reduction is one of the first signs of Irish austerity-fatigue.

Robeco Euro Government Bonds

We remain positive on the peripheral bond markets as fundamentals are improving and the ECB’s policy remains very supportive for the periphery. We expect further unconventional measures to be needed to reach the ECB’s balance sheet expansion target. This will continue to spur the search for yield. Peripheral bonds remain attractive in this environment.

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