Latest EU finance deal are ‘baby steps’, says Kames Capital’s Roberts
Kames Capital’s joint head of fixed income David Roberts has commented on the EU summit outcome.
Following lengthy discussion and debate EU leaders announced several steps aimed at reducing stresses in financial markets and promoting economic growth. Although the reality may be that these steps prove to be at best baby ones, they are none the less bigger than markets had been expecting.
Supervision of the banking system by the ECB, direct lending to banks through the ESM and confirmation that lending from the ESM to Spain would not subordinate existing debt holders each has positive implications.
In the short term, risk assets especially those related to the financial sector will bounce. Core Government bonds, especially Bunds will be vulnerable. Longer term, it remains to be seen if these baby steps are the first on the path to European politicians addressing the fundamental problems of a single currency and diverse fiscal policies. For now though, those long risk should enjoy their time in the sun.