March 30, 2011
Portugal, Ireland and Greece are in undeniably dire straits, but some investors may be ready to cull Italy and Spain from Europe’s herd of fiscal troublemakers.
Dubbed with the unflattering acronym PIIGS at the start of the euro-zone debt crisis, Portugal, Ireland, Italy, Greece and Spain have seen markets attempt to tie their fate together.
But recent weeks have seen Italian and Spanish government bonds insulated from a crushing selloff that has sent Portuguese, Irish and Greek yields soaring.
“We are clearly differentiating ourselves from the countries which have problems and this is good news, but I expect spreads to fall further, and to fall by quite a bit,” Spanish Treasury Secretary Carlos Ocana told reporters in Madrid on Tuesday, according to Reuters.
“There are some signs of decoupling,” said Elwin de Groot, fixed-income economist at Rabobank in Utrecht, Netherlands.
But he notes there were similar signals last year, only for Spanish bond yields to spike higher as overall market sentiment deteriorated in the autumn.