A Financial Times article today was all about the optimism of international investors regarding the return from investment in Portuguese bonds.
Philip Brown, a specialist in public debt at Citi Bank, says Portuguese debt is the only one in the eurozone with a return this year, at 3.9%, and sees "huge upside potential here."
CPR Asset Management’s Fanny Jacquemont joined Citi Bank’s Philip Brown in agreeing Portugal’s bonds are a safe and potentially profitable bet.
“The greater risk is behind us ... the macroeconomic dynamics is improving, the government is very committed to reducing the deficit, the banking system is solving its problems,” according to Jacquemont.
The FT article by Kate Allen, states that the interest rates in Portuguese bonds have been decreasing after the increases registered at the end of 2015 when the Socialist Party took power with "an anti-austerity programme," which left investors worried about the country's overall economic policy and its political stability.
However, states the FT, Prime Minister António Costa "has shown that he is committed to the budgetary targets agreed with international creditors and, at the same time, the economic indicators suggest that the economic outlook has been improving since the beginning of 2017, "with the deficit falling to the lowest in the last 40 years, the economy growing 13 consecutive quarters and unemployment in March the lowest since 2009.
Without omitting the risks that still exist, the article refers to internal and external factors that must be taken into account, from the banking sector to the ‘junk’ status assigned by three credit rating agencies and to threats to the political instability of Europe.
It is a scenario that leads John Stopford of Investec Asset Management to admit that it is not possible to "be comfortable with any significant exposure" to Portugal.
However, JP Morgan's Richard Gustard opts for another optimistic note, arguing that Portugal may "suffer less than other peripheral countries" if the European Central Bank withdraws some of its stimulus to the economy."Portugal is a unique case and an attractive asset in an environment of risk," he concludes.
The article did not focus on Portugal's burgeoning public debt which has soared to €243.5 billion, up €10 billion on the March 2016 figure.
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The Economist telling us ... “The country’s high debt levels remain the elephant in the room, Should the euro zone face a shock, such as Marine Le Pen winning France’s presidential election, Portugal is the country most likely to face a debt crisis, he thinks...... “Supporting domestic demand through a slightly looser fiscal policy may have paid off,” says Mr Santi, “but it is no substitute for the structural reforms Portugal still needs.”
http://www.economist.com/news/21719753-socialists-say-their-keynesian-policies-are-working-others-fret-about-portugals