Euro zone risky sovereign debt from Portugal to Greece is a star in the new year. Peripheral economies are reforming, and their bonds provide a haven against U.S. tapering. Yet the euro zone has no solution to the problem of high debt and low growth. Bondholders will not always be protected.
Peripheral sovereign debt, once a pariah asset class, is doing fine. Global stocks are choppy, as markets are bracing for the end to U.S. money-printing and slower growth in emerging economies. Ireland grabbed €14-billion ($20.5-billion) of orders for a bond deal this week. Yields on Irish, Spanish and Italian bonds are all comfortably below 4 per cent, while Greek yields are back to 7.5 per cent, a level last seen before the country’s 2010 bailout.