Hints of Eurozone Reintegration

The reduction in cross-border financial asset holdings and regional trade across the eurozone are perhaps the most visible scars left from the global financial crisis and subsequent fallout in European sovereign debt markets. Under pressure from national regulators to...

Outsize demand for risky Italian bonds

Going by the strength of demand at recent Italian sovereign bond auctions, it would be easy to forget that the government was recently locked in an acrimonious dispute with Brussels over its budget deficit target for 2019. Now that the budget fiasco has died down,...

Eurozone deflation risk remains

Market momentum is building behind the global growth slowdown narrative, with last week’s downbeat European Commission forecast report triggering a safe-haven bid. The eurozone, in particular, is caught in the crosshairs with the German and Italian economies buckling...

SNB may soon come under pressure

We have previously argued that the Swiss National Bank has become slightly more tolerant of modest currency strength, given that the sheer scale of previous FX intervention has dented the central bank’s appetite for further balance sheet expansion. The top-left chart,...

Italian Bond Market Delivers its Warning

While we don’t want to get drawn into the Byzantine world of Italian politics, we do have a thing or two to say about bond markets. What has struck us the most about the Italian bond market has been the degree of volatility in BTPs and drop in liquidity. The first...

Czech koruna: Pausing for Breath

Since we highlighted the potential of CE3 markets in July 2017 in light of the global reflation trend, our preferred trade – short EURCZK – has made a modest 2.8%. Even after this relatively anaemic rally, we believe that the koruna will now take a breather. As a...

Financial Balkanisation of the Eurozone

Convergence in core-periphery sovereign credit spreads since 2012 would seem to vindicate the raft of monetary easing measures deployed by the ECB to stabilise the eurozone. This is only half the story, and the other half is decidedly negative. The eurozone collapse...