Spain, Italy and Portugal bonds declined after negotiations between the Greek government and its creditors collapsed. Greek PM Alexis Tsipras told creditors to “get real” and refused to make pensions cuts. Without a deal, Athens is expected to default on a €1.5bn debt repayment to the IMF due by the end of June.
“As the situation stands, it makes sense to go long German bonds and sell peripheries,” said Christoph Rieger, head of fixed-income strategy at Commerzbank AG in Frankfurt, told Bloomberg. A long position is a bet an asset’s price will rise. “We thought some form of compromise should have been reached by now but that wasn’t the case. It’s either Greece comes back with a new proposal, or the focus will soon shift to how to deal with default and Grexit.”
Barclays supported to be long 10y US Treasuries too.
“Our equity strategy team believes the spike in German Bund yields provides a good opportunity to buy European cyclicals, value, and banks,” experts at Barclays commented.