Investors are recommended to buy short-dated Spanish bonds on setbacks, despite the possibility of a rating downgrade by Moody's to non-investment status, which "will increasingly weigh on market sentiment over the next two weeks," RBC says. According to RBC, Moody's has indicated that "its review for a possible downgrade of Spain's rating will likely continue through the end of September. Information on the scope of bank recapitalization needs is still pending and also in terms of Spain requesting further European aid and the attached conditionality." RBC adds that despite the possibility of a downgrade to non-investment grade, the front end of the Spanish curve still remains "relatively safe," backed by the prospect of ECB intervention, and that any setback in yields should be viewed as a buying opportunity.
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