Saturday, October 22, 2016

Risk premium goes down to Portugal and rises for Italy – Express

The yields of Treasury Bonds of Portuguese (OT) in the term of reference 10-year closed the week falling to 3,19% in the secondary market of sovereign debt, a decline of 11 basis points compared to the value recorded a week ago. It was the biggest decline among the peripheral of the euro.

The risk premium of the Portuguese debt went down to 319 basis points – the equivalent of 3,19 percentage points above the cost of debt financing German 10-year benchmark. Ended by a decline of nine basis points from October 14.

the Fruit of the détente, the profitability of the entire debt bond Portuguese has improved, although it is still in the ground negative. The return since the beginning of the year has improved from -0,3% to 7 October to -0,89% to 21 October, based on the index of Bloomberg. Portugal remains the only euro member with a negative profitability since the beginning of the year of 2016 and a horizon of 52 weeks. The average profitability in the euro area is 5.3%, as measured from the beginning of the year.

The stress of a court of rating of the Portuguese debt long-term level of speculative, aka 'garbage finance', failed to materialise. The agency of the canadian DBRS maintained on Friday the rating of the investment, and the 'trend' stable for the Portuguese debt.

The consensus of the analysts during the week pointed to this decision. Some analysts, such as the Commerzbank, predicted a change in the 'trend' for negative, but not this materialized.

Shortly before the announcement of the decision of the DBRS, the Management Agency of the Public Debt and of the Treasury (IGCP) has announced an auction of bonds to 5 years for the next Wednesday. A clear sign of the IGCP, long-awaited by investors, the continuation of the preventive strategy of ensure until the end of the year a financial cushion for the following year, a precaution also recently praised by the International Monetary Fund.

Stress has had an impact of nearly 1 percentage point

Since September that there has been an upsurge of speculation around a cut rating to 'junk financial' Portuguese debt and the possibility of a second bailout to Portugal.

This stress has led, in the term of reference of the OT, the 10 years, a rise in yields of a minimum of the year, from 2.7% in mid-August, to a peak of eight months to 7 October, with the cost rising to 3.6%. On that date, joined the impact of the speculation around the possibility of a sudden stop of the program of purchases of the European Central Bank or of an anticipation of its gradual reduction, even before the march 2017 (the scheduled date for its completion, if it is not already extended in the meeting of 8 December). Mario Draghi, the ECB president, considered this speculation as based on "random comments of someone who has no clue or information".

analysts await, now, the results of the auction next Wednesday and their impact on the behavior of the yields of the debt bonds for the Portuguese in the secondary market.

Italy in the focus of attention of analysts

The cost of financing long-term debt of the Italian and the risk premium went up this week.

The yields of the bonds Italian 10-year rose 1.38% to 14 October to 1,45% to 21 October. In a week increased by seven basis points, the single rise between the peripheral of the euro, against a decline of 11 basis points for Portugal, six basis points for Ireland and four basis points for Greece. In the case of Spain have remained at 1,14%. As for the risk premium Italian has climbed 142 basis points to 145 basis points in that period.

analysts draw attention to the continued problem of non-performing loans and economic growth, after the recession of 2014, remains below 1%. Anteveem a discussion of 'hot' in the European Commission around the 'draft' State Budget for 2017 presented by the government of Matteo Renzi, and highlights the political risks of a referendum on matters of constitutional scheduled for 4 December.


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