Continued uncertainty related to Greece’s ability to meet loan obligations, a potential exit from the eurozone and worries of a contagion effect to Spain has pushed investors to sell out of peripheral European bonds and opt for German and French government bonds.
S&P Dow Jones Indices analyzed the European bond market Tuesday and found investors moving to the safety of French and German bond markets, and out of Greek, Spanish and Italian bonds.
Continued concerns over Greece’s ongoing membership in the eurozone, any potential contagion effect to other parts of Europe, coupled with the growing popularity of the Spanish anti-austerity, anti-corruption party Podemos, are causing uncertainty in the markets, said Heather McArdle, director, fixed-income indexes at S&P Dow Jones Indices, in an update on the markets.
The S&P Greece Sovereign Bond index yielded 12.32% by the close of markets Tuesday, widening 55 basis points from Monday’s close. The S&P Spain Sovereign Bond index widened 6 basis points over the same period to yield 1.13%. Italy also widened, by 5 basis points to a 1.23% yield, Ms. McArdle’s update said.
By comparison, German and French government bonds rallied, with yields tightening. The S&P Germany Sovereign Bond index contracted 4 basis points to a 0.22% yield, and the S&P France Sovereign Bond index’s yield was 0.47%, a decrease of 4 basis points by the close of markets Tuesday.