(We’ll get our coat)
Since there’s a question-mark over who’s going to buy the circa €200bn of fresh eurozone sovereign debt being sold in the first three months of 2012…
We were piqued by Rabobank’s Richard McGuire and Lyn Graham-Taylor argument on Friday that picky investors should look at the Netherlands. (There’s a sale of three-year Dutch debt next week.)
Here’s their case:
As the Eurozone debt crisis has intensified, investors have generally become significantly more discerning with regards to AAA sovereign paper and the ‘true’ core now arguably only contains Germany, the Netherlands and Finland. Both France and Austria now form a peripheral core – France as a result of the exposure of its banks to the periphery and Austria due to its banks’ involvement in Eastern Europe (specifically Hungary)…
Given we feel that the crisis must get worse before it gets better, we believe that the Netherlands will benefit from safe haven flow due to its greater liquidity than Finland and the [yield] pick-up it offers over Germany.
And here’s an interesting chart of bid-offer spreads (topical issue lately) among AAA eurozone sovereigns:
While looking at the diverging bid-offer spreads in the above, consider the issuance target of the Dutch this year — some €60bn — versus the €190bn planned by France.
As if bang on cue on Friday — the French government had to swat yet another downgrade rumour in the market at pixel time.
Related link:
The German bond market is all about ‘buy and hold’ - FT Alphaville