After ECB's "easy money" exit, which European countries’ debt you would choose to buy?
Now, the European Central Bank (ECB) has laid out plans to end its huge stimulus program. According to FuninUSA news, the central bank’s trillion-euro asset purchase program will end in December if the economy remained resilient and that a rate hike is unlikely to come before the second half of 2019.
Since 2015, both governments and market players knew that European debt would be bought no matter what since the ECB has conducted systematic purchases bonds. Now that the ECB will stop being such a predictable buyer, the market could be more volatile.
In this case, some people would consider German bunds looks a little bit more attractive. This is because German debt is perceived as less risky than that of peripheral countries (like Greece, Italy and Portugal) and where for instance political turmoil is often a cause of concern.
But for other investors, the debt from those peripheral countries is still attractive as well.
FuninUSA reported that the principle seems to be that even though there are higher chances of getting loans to the German government repaid on time, there are higher returns when lending to Portugal.
Buying peripheral debt is less expensive now than at the wake of the debt crisis, yet the risk of any default is also lower given that there aren’'t outstanding repayments due in the short term.
