Eurozone bonds seen turning page on debt crisis


The eurozone bond market is gradually recovering from the disruption caused by the debt crisis, analysts say, with the gap in borrowing costs between fragile countries and Germany at two-year lows.

“The bond market is benefiting from both the staunch support of the ECB for one year and better-than-expected economic indicators for the past couple of weeks,” said Rene Defossez, a bond analyst at French investment bank Natixis.

“This cocktail is reassuring investors,” he added. Normalization of the bond markets began in July 2012 when European Central Bank chief Mario Draghi pledged to do “whatever it takes” within the ECB’s mandate, to protect the euro and later unveiled a facility to support countries launching stabilization programs.

The past few months have seen a series of reassuring economic signals, topped by data showing the eurozone exited its record 18-month recession in the second quarter with 0.3 percent growth. Germany managed 0.7 percent and France 0.5 percent. And while Spain and Italy still contracted, the rate had slowed.