Investors have piled into Southern European debt recently. Italian, Spanish, Portuguese and Greek borrowing costs have all fallen sharply over the past month as bond markets priced down political risk in the eurozone.
Analysts say the market is welcoming what it sees as a waning of political concerns in the eurozone against a backdrop of still-easy monetary policy. “Whether it is justified or not, the market is not worrying about the Italian political scene at the moment and, on the other hand, there are hopes that the fundamental situation is improving, with higher growth and less pronounced problems in the banking sector,” said DZ Bank strategist Daniel Lenz.
“The overall situation of improving growth numbers in the eurozone, in combination with the [European Central Bank] sticking to their expansionary path, is very positive for peripheral spreads.”