Robeco: Italien beendet Rezession

Peripheral bond yields rose in line with core bond yields last week. Only Portugal outperformed. As expected no breakthrough was accomplished during the Eurogroup meeting on Monday, although the statement afterwards mentioned some progress was made. The ECB increased the emergency liquidity assistance to the Greek banks and decided not to increase haircuts on Greek collateral. Portuguese bonds have returned 3.5% this year, Italian bonds 1.4%, Spanish bonds -0.1% and Irish bonds 0.0%, against -0.4% for German bonds.

Greece

Greece made the EUR 750 mln IMF repayment in time, but it used EUR 650 mln from its IMF reserve account, which has to be replenished soon. This means that in fact they borrowed from the IMF to repay the IMF, which indicates government cash reserves have dried up.

The Greek economy fell back into recession in the first quarter of 2015. In 2014 Greece had finally shown positive GDP numbers after six years of recession. As a sign Greece is willing to make compromises with its creditors it unblocked the sale of a 51% stake in Piraeus, its largest port. Greece is in advanced talks with China’s Cosco over the sale.

Italy

Italian real GDP rose by 0.3% in the first quarter of 2015, thereby officially ending its period of recession. This was the strongest quarter for growth in 4 years.
The EU commission will allow Italy more time to cut its budget deficit further if it implements structural reforms with a significant positive impact on growth. This again demonstrates EU policy makers’ supportive stance towards the periphery.

Robeco Euro Government Bonds

We remain positive on peripheral bond markets. Fundamentals are improving with stronger growth. The ECB’s bond buying spurs the ‘search for yield’ by investors. Peripheral bonds remain attractive in this environment. 

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