One and a half years ago, Guillermo Felices helped his clients overcome Europe’s public debt crisis. Now, she’s upsetting the bonds once at the center of this storm, between them and Greece.
According to a Bloomberg report, Italy, Spain, Ireland, Portugal and Greece, which almost collapsed at the expense of their debt in 2011, have since turned into top bond issuance options for companies such as PGim Fixed Income, where FeliS is working.
His recommendations are emblematic of historical change that has taken place in the area’s debt market hierarchy. Recovery in European region has begun for years, and as investors avoid President Donald Trump’s policy, their counterparts are increasingly considered healthy alternatives to the debt of Europe’s largest economies.
Spanish, Greek and Portuguese bonds now attribute all less than France. Italy is in the process of surpassing Germany and France for the fourth consecutive year on the basis of overall returns – equaling the largest series of wins recorded.
“After the crisis, the story has always been that Europe will be difficult to solve,” Felices said, noting the history of hypotension, excessive public spending and arguments between Member States. “This is less so now, especially in terms of fiscal waste, while the US is more unorthodox.”
US government bonds have been hit this year, mainly in April, when Trump presented a package of offensive duties. Concerns about US budget prospects have also been rekindled.
In the meantime, the attractiveness of the region’s bonds is due to the post -pandemic economic recovery that has exceeded the profits of the economic forces of the region, Germany and France. Spain is a special bright spot and is expected to grow by 2.5% this year, with more than twice the rhythm of the wider block.
The exposure of investors to the nations on the outskirts of Europe remains close to the highest levels of the last five years, according to a monthly Bank of America survey published on Friday.
German turn
Another important turning point came in March, when Germany left decades of fiscal austerity and promised to invest billions of euros in defense and infrastructure. While this is considered a vital catalyst for the development of the EU, the upcoming flood of German bonds made some investors cautious and reduced the country’s debt prices.
“We prefer countries with strong growth and which are not committed to increasing defense spending as much as Germany,” said Niall Scanlon, Mediolanum International Funds Limited. Spain is its “special choice”, though it says it has also preferred Italy this year.
Then there is France, which was once considered Germany’s substitute for its financial burden, but now is a no-go for many bonds. The climate of investors worsened last year, as uncontrolled public spending left it with the largest deficit in the eurozone. The government’s efforts to pass its budget for 2026 in the coming months may trigger a new explosion of volatility.
As a result, the difference in borrowing costs between France and Italy has shrunk: investors require only 12 additional performance points to lend Italy for 10 years instead of France – the smallest amount for two decades.
“We prefer Italy and Spain to France and Germany,” said Sachin Gupta, a portfolio manager at the Pacific Investment Management Co. The over -performance of the region “can continue, even after it has gone a long way,” he added.
In a June speech, European Central Bank official Philip Laine pointed out the relative stability of the eurozone bonds this year, even when other debt markets saw significant prices. This is probably due to factors such as inputs from domestic and global investors, as they reduced their exposure to US assets, as well as the “common commitment” to budgetary responsibility throughout the bloc, Lane said.
Certainly, regional bonds have already made so much rise that possible yields are not as attractive as they once were. Greece is a typical example – less than three years ago its 10 -year bonds yielded over 5%. Since then it has been reduced to about 3.30%.
“It is undisputed that the heavy load has become,” said Gareth Hill, a senior funder of Royal London Asset Management Ltd.
And there is still some cautiousness among US investors to attempt European state markets beyond German bonds, which maintain their capacity as the refuge of the region. Ales Koutny, head of Vanguard’s international interest rates, said that while demand in the US has increased, bonds have received “lion’s share” of inputs.
However, it is difficult to argue that the states of the region will fall into the slow lane again, unless there is a new financial crisis or a sharp decline in fiscal discipline, according to Royal London’s Hill.
Kristina Hooper, head of the Man Group PLC strategy, argues that – with proper control – there are many opportunities that can be found beyond the traditional core.
“It’s time to differentiate, at least to a small extent, from the US,” said Hooper of New York. The regional countries “are doing well and their counterparts look much more attractive than it used to be,” he said.