Robeco: Italien: Aussichten bessern sich

Main market events

Peripheral bonds underperformed German bonds this week. This can partly be attributed toincreasing political tensions in Spain and Portugal, but also to declining market expectations of alarge-scale increase of the QE program by the ECB in December. Portuguese bonds have returned2.8% this year, Italian bonds 4.0%, Irish bonds 1.3% and Spanish bonds 1.3%.

Portugal

Portugal’s new centre-right minority government presented its program. Parliament will vote onit next week. The program includes some easing of austerity to try to gain support from part ofthe socialist party. For the government to survive, up to eight abstentions in the opposition arenecessary. If the program is voted down, the President has to nominate a new prime minister.

Greece

The ECB stress test on the four main Greek banks showed recapitalization needs of EUR 14.4bln.Greek parliament approved further bailout measures, needed for disbursement of the next EUR2bln tranche. The IMF asked for a debt relief agreement for its participation in the 3rd bailout.

Italy

2015 GDP growth projections were revised up to 0.9% by both ISTAT and the EU commission.Stronger domestic demand is cited as the main driver of the improved economic outlook.

Spain

Spanish fiscal deficit will overshoot targets in 2015 to 2017 according to the EU Commission.Although the deficit continues to decline in coming years due to cyclical factors, EU projectionsdiffer 0.5% (2015) to 1.2% (2017) compared to the Spanish government’s forecasts.

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 expected FED tightening) and further political uncertainty might weigh on the periphery.Overall the fund has significantly reduced its periphery exposure in recent weeks. Currently thefund has overweight positions in Portugal and Ireland versus underweight positions in Spanishand Italian bonds. Portugal benefits disproportionately from QE and strong economic growth israpidly improving the Irish debt metrics. Peripheral bonds make up 28% of the fund. Year-to-datethe fund’s absolute performance is 1.37%.

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