Spain and Ireland, two of Europe’s faster-growing economies with lower political risk and debt ratings clustered around A, seem to be carving out a niche for themselves in Europe’s peripheral bond market.
That means they perhaps belong to a new sub-section of debt that spells A-SP-IRE, essentially removing them from PIIGS, a less-than-complimentary acronym for what were once considered the debt-laden and high-deficit economies of Portugal, Ireland, Italy, Greece and Spain.
The economies of Spain and Ireland have come a long way from where they were about five years ago, with their growth rates visibly faster than those of their European peers. Their political backdrop is also calmer relative to growing voices of populism in countries such as France, the Netherlands and Italy. Those credentials matter more, with investor attention turning toward a potential winding down of the European Central Bank’s stimulus, accelerating the trend of lower yields relative to their former peers.
Source: Bloomberg (03 February 2017)