Sovereign Credit Commentary

“The crisis in Europe is over,” declared French President François Hollande last month during a visit to Japan. But it appears that EU politicians may be once again guilty of complacency after Portugal reminded the world that the crisis was dormant, rather than extinct.

Barclays made the most senior hire of the week, appointing ex-Goldman Sachs trader Michael Winkelgrund as head of exchange-traded fund trading. Deutsche Bank, meanwhile, hired Monty Lee as a senior index options trader from Barclays. In Asia Pacific, Nicholas Smith has replaced PJ Andersson as global head of pan-Asian equity derivative and convertible sales at Citigroup, after the latter left the firm last week.

Credit spreads across the globe have rallied on the back of Abenomics, the unconventional, expansionary monetary policy implemented by the Bank of Japan in April.

Korea’s sovereign CDS recovered from a recent bout of widening and was back to its usual place–flat against China.

Another week in the sovereign markets and yet more barriers are being broken down.

After the drama of the Cyprus bailout it was back to focusing on economic fundamentals in the sovereign market.

A bailout for Cyprus was agreed before the deadline, as expected. However, the relief rally that often follows such announcements didn’t materialize, and the EU only had itself to blame.

Political turmoil in Italy has been the main sovereign credit story in the first-quarter, but the periphery has proved to be surprisingly resilient since the inconclusive election in February.

Negative catalysts have been few and far between in recent months, but one arrived with a vengeance this week in the form of an inconclusive Italian election.

France and Germany have always been at the core of the eurozone, and the European Union project as a whole.

The Italian elections are but days away, and the sovereign credit markets could be forgiven for being jittery. However, they put in a solid performance over the second week of February, with spreads in the Eurozone’s periphery tightening significantly.

Spain and Italy were always going to be the most topical of the eurozone peripherals in the first-quarter of 2013, and they have lived up to their billing so far.