seems the market has now fully discounted a no deal Brexit will not
materialize. Italian bonds have returned 1.5% year-to-date, Spanish
bonds 2.1%, Portuguese bonds 3% and Irish bonds 2.0%
Friday March 15th, rating agency Moody’s will review Italy’s rating. In
October last year Moody’s downgraded Italy to Baa3 with a stable
outlook. At Baa3, just one notch above high yield, Moody’s rating is the
lowest of the three major rating agencies. Both S&P and Fitch rate
Italy at BBB. It is not expected that Moody’s will change its rating or
for that matter its outlook tonight. The agency however will publish its
updated macroeconomic assessment. This could reveal to what extent
Moody’s expectations around Italy have changed and how this could impact
rating action in the future. Ratings remain a key risk for Italy. Later
in April, S&P will review Italy. A downgrade by S&P either in
April or later this year in October can’t be excluded.
tonight, S&P will publish its rating review for Portugal. At BBB-
with positive outlook S&P could upgrade Portugal to BBB. Portuguese
bonds have been outperforming its peers recently. A positive outcome
tonight could underpin this rally. But given Portugal’s relatively low
rating profile, Moody’s has Portugal at Baa3 and Fitch at BBB, it seems
unlikely Portugal’s performance momentum can continue at this pace.
reinvestment data show that ECB gross reinvestments per country appear
to be evened out over the year and also move towards the capital key.
Portugal and Ireland would benefit disproportionally from this approach.
Italy was the outlier, as over the first two months, Italy saw net
buying whilst a move toward the capital key would have implied net
selling. This could indicate some front loading of Italian purchases.
Robeco Euro Government Bonds
fund is slightly defensively positioned in the periphery but overweight
in semi-core long-dated bonds. Semi-core bonds from Belgium and France
did find some ground as a more benign central bank regime, with policy
rates lower for longer, is seen as supportive. The fund’s investments in
peripheral bonds are at circa 33%, about 7% below the level of the
index. Year to date the absolute return of the fund is 1.65%.