For Paul Brain, investment leader of Newton’s fixed income team, while peripheral bonds could initially be the firing line after a Greek fallout, there remain a number of support tools including the ECBs QE programme that will help stop yields rising in the way they did in 2011.
“We believe the peripheral economies are in much better shape economically and their legacy problems (bad property loans and fragile banking systems) are less of an issue,” he explains.
“Reducing peripheral European government recognises that there could be an initial sell-off but also that given low yields we wouldn’t miss much if the market were to rally. Once the short-term market reaction is played out we would expect the peripheral bond market to stabilise.”
