According to reporting by Bloomberg, bond investors getting distracted by the ongoing Italian debt issues need to take a closer look at Spanish bonds, where opportunities are appearing as the European country gets largely forgotten amidst political posturing.
Key highlights
Yield premiums on Spanish bonds are rock-bottom cheap compared to their more headline-popular peers, according to Bank of America Merill Lynch, with HSNC Holdings marking Spanish 10-year bonds as looking exceedingly attractive compared to their Italian counterparts.
Spanish debt could get a further boost from another round of targeted refinancing operations from the European Central Bank, or further changes to the ECB’s asset-purchasing programs, and any further talk of recovery in risk assets or supportive ECB measures will go a long way towards further boosting Spanish yields behind the curtains of the Italian stage show.
The market is too complacent about the chances of a budget compromise in Italy going smoothly,” Chris Attfield, a London-based fixed-income strategist at HSBC, wrote in a client note, adding that Spanish debt was trading cheap compared to its sovereign rating. – Bloomberg
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