Peripheral European Sovereign Yields Continue to Decline

Positive macroeconomic economic news and a renewed confidence spurred European investors to drive corporate credit spreads tighter 

Dave Sekera, CFA 20 August, 2013 | 3:08PM

Favorable European economic data and rising confidence are fanning the hope that the worst of the eurozone recession has passed and the economic region may be on the mend. Second-quarter eurozone gross domestic product grew 0.3%, the first positive reading since the third quarter of 2011.

Growth was led by Germany and France, whose economies grew 0.7% and 0.5%, respectively. However, while GDP expanded in the northern countries, beleaguered southern countries like Italy and Spain continued to report economic contraction (negative 0.2% and negative 0.1%, respectively), albeit at slower rates of contraction. Although the beleaguered Southern European nations remain stalled in recessions, German industrial production, factory orders, and exports are on the rise and should continue to provide a lift to the rest of the eurozone. In addition, upbeat data out of China, such as stronger-than-expected trade data, also spurred hope that emerging markets would continue to support global economic growth.

Positive macroeconomic economic news and a renewed confidence spurred European investors to drive corporate credit spreads tighter as macroeconomic fundamentals have been the main driver of corporate bond performance in Europe.

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About Author

Dave Sekera, CFA  is a senior securities analyst with Morningstar.

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