LONDON (MNI) – EMU peripheral spreads edged tighter Tuesday as risk
sentiment improved ahead of a key Greek austerity vote Wednesday and
following reports in the Wall Street Journal that austerity measures
would be speeded up in Portugal after Q1.
The WSJ article, titled “Portugal to ramp up austerity,” cited two
government officials familiar with the matter, who said Portugal’s new
government will accelerate some austerity measures designed to cut the
country’s budget deficit after calculations suggested cuts haven’t been
deep enough in the first quarter.
Spreads also benefited from earlier media reports that suggested
German banks were backing a French plan to roll Greek debt into 30-year
maturities. However, a lack of concrete details has kept a lid on price
action in afternoon trade. Analysts estimate European banks have around
E20 bln of Greek sovereign bonds maturing in the next three years, while
Greek domestic banks are thought to have between E20-25 bln maturing
over the same time scale. The EU hopes a “voluntary” rollover by
European banks will save Greece upwards of E30 billion.
In the currency markets, euro-dollar saw a high print of $1.4397 in
thin conditions and amid a session that showed little respect for techs.
Traders were chasing around various stories in the pair, namely talk of
sovereign gold sales for euros that Market News International heard on
the grapevine, while others highlighted ECB risk for next week.
In spreads, Greek 10-year spread is 39bps tighter vs Bunds at
+1,319bps. This spread traded at a record high of +1,495bps on June 17.
Elsewhere, the Portugal 10-year spread is 38bps tighter verus bunds
at +944bps, having traded at an earlier high of +984bps. Ireland’s
10-year spread was 29bps tighter versus bunds at +867bps, having hit a
record high of +898bps on Monday. Spain was 10bps tighter at +269bps on
talk of domestic buying in Spanish bonds.
–London newsroom: 00 44 20 7862 7499; email: nmackie@marketnews.com
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