Portuguese bonds staged an impressive rebound on the back of the European Central Bank’s cheap loan money flood in the first half of the year. The bailed-out country has managed the rare feat of being one of the best performing sovereign bond markets of the year so far with returns of over 40 percent for 10-year government bonds.
Watching how the mildly positive market reaction to this weekend’s 100 billion euro Spanish bank bailout evaporated within a morning’s trading, it’s curious to look at the timing of the move and what policymakers thought might happen. On one hand, it showed they’d learned something from the previous three sovereign rescues in Greece, Ireland and Portugal by pre-emptively seeking backstop funds for Spain’s banks rather than waiting for the sovereign to be pushed completely out of bond markets before grudgingly seeking help.
Just as global markets nurse a hangover from their Q1 binge on cheap ECB lending — a circa 1 trillion euro flood of 1%, 3-year loans to euro zone banks in December and February (anodynely dubbed a Long-Term Refinancing Operation) — there’s every chance they may get, or at least need, a proverbial hair of the dog.
In a week in which euro zone debt fears returned in earnest for the first time in 2012, a positive investment tip about one of the three bailed out peripheral euro economies was eye-catching in its timing. RBS on Thursday issued a recommendation to its clients to buy the bonds of one of Ireland’s main commercial banks Bank of Ireland.
It appears the penny has finally dropped in Washington.
Government-backed lending programs around the world have sparked a revival in financial and corporate borrowing — for now. Worldwide sales of corporate bonds rose to $251 billion in January, the highest level since May 2008, marking the first signs of a thaw after a long global capital markets winter. The following are the global sales totals and a list of the biggest borrowers, according to Thomson Reuters data.