Europe’s Peripheral Bonds Get Lifeline From Last-Minute EU Deal

(Bloomberg) -- It’s been a while coming, but Europe’s peripheral bonds, most notably Italy’s, look finally to have some good news from governments, not just the European Central Bank.

The government bonds of the region’s most indebted nations may have strong start to the week after European Union finance ministers agreed on a 540 billion euro ($590 billion) package of measures to combat the economic fallout from the coronavirus. The deal, after days of negotiation, looks set to help yield premiums across the region tighten.

“It’s a good signal they have agreed on a set of measures,” said Luca Cazzulani, senior fixed income strategist at UniCredit SpA. “The market should react to the good news but the measures are broadly as expected.”

Still, the package falls short of what Italian politicians have been calling for -- the issuance of so-called coronabonds, which would be jointly-issued debt by governments across the region. The current measures also need to be approved on by leaders as early as next week, with divisions still remaining.

Otherwise, the week is set to be a broadly quiet one after the Easter holiday, with just a handful of economic data releases and modest bond supply. And the ECB’s pandemic bond-buying program is set to keep an yield rises capped.

Here’s what to expect next week:

• Economic data:
  • Curtailed week due to the Easter break is dominated by the final inflation readings for March, with data for the euro area due Friday; YoY est. 0.7%, prior 1.2%
  • No tier one data scheduled for the U.K.
• Central banks:
  • Bank of Italy releases its quarterly bulletin Friday
  • BOE’s Tenreyro speaks Thursday at 2:30pm London, BOE’s Haldane and Broadbent hold briefing Friday at 3pm
• Bond sales (to total around EU17b, U.K. also selling around GBP10b):
  • Tuesday: Netherlands to sell 0% 07/2030 bonds
  • Wednesday: Germany to sell EU1b of 2.5% 07/2044 bonds; U.K. to sell GBP3b of 0.875% 10/2029 and GBP2b of 1.75% 09/2037
  • Thursday: France to sell bond and inflation-linked securities, Spain to sell 0% 04/2023, 0% 01/2025, 1.3% 10/2026, 1.85% 07/2035; U.K. to sell GBP3b 1.5% 07/2026 and GBP2b 1.75% 01/2049

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