The future of the euro remains a key concern in Italy, Spain, Greece
Despite the distraction of the London Olympics, the future of the euro continues to be a key concern for investors, particularly in Spain, Italy and Greece, data provider Interactive Data has warned.
“In July, economic concerns continued, the Spanish economy remained in recession, retail sales continued to fall, unemployment continued to grow, bad bank loans grew, and 6 regions asked the government for bailout support,” said Anthony Belcher, director for Europe, Middle East and Africa Valuations at the company.
Spain bond yields rose significantly during the month, the benchmark 10 year reaching a peak of over 7.60% before falling back to around 6.75% at the end of the month and to 6.59% today.
Italy fared little better with 10 year benchmark yields peaking around 6.75% before falling back to around 5.70% at the end of the month and 5.82% today.
“The falls in the yields for both Spain and Italy were largely attributed to comments from ECB governor Mario Draghi who stated the ECB will do ‘whatever it takes’ to save the euro,” the director said.
At the beginning of the month, Spanish bank BBVA announced the results of its tender offer for 49 tranches of Spanish ABS and RMBS bonds with €638m of the €9.16bn outstanding issuance bought back.
The average purchase prices in general came out above the initially offered prices which were already above secondary levels, Interactive Data said.
“In senior Spanish paper we observed a tightening on selective Spanish names only, while some senior tranches widened in DM due to specific issuer related risk,” Interactive Data said.
Meanwhile, Greece continues to cause concern. The ‘troika’ composed by the European Union, International Monetary Fund and European Central bank visited Athens during July to review the progress being made towards deficit reduction targets.
“They reported concerns that the targets are unlikely to be met, suggesting further debt restructuring may be necessary,” he said.