It’s not hard to find a blog, comment piece or research paper suggesting that once the ECB takes its foot off the quantitative easing pedal, eurozone bond spreads will fan out — with those in the periphery the most likely to suffer.
Yet there is a whole host of evidence that investors either don’t agree — or don’t care.
Portugal’s Santander Totta enjoyed a strong reception on Tuesday as it sold a 10 year covered bond, while Portuguese sovereign yields earlier this week snapped in faster than you can say “do whatever it takes to preserve the euro” after S&P upgraded it to investment grade following last week’s market close.
A book of over €10.8bn for Austria’s debut century bond last week also suggests that investors have few qualms about buying debt that will mature when Mario Draghi is a name found in dusty textbooks rather than a man for whose words bankers, issuers and investors wait on tenterhooks every month.
While debt mutualisation and all the other tasks needed to create a fully functional monetary union are as long a way off as they have ever been, investors certainly seem to be buying into the story that the eurozone — and the European Union — is here to stay.
In those well-thumbed textbooks 100 years hence, it could well be that 2017 is seen as the crucial year in that change.
After Brexit, there was a very strong sense among many that Dutch and French voters could bring into power populist politicians who would have been just as damaging to the European project as the decision UK voters made in the summer of 2016 — but instead, those forces were rejected.
The deals and market movements of the last week suggest that investors don’t see Europe’s voters changing their minds any time soon.