UK referendum: pro-EU campaign managing to shift public opinion somewhat, but the margin is still too slim for comfort…….<\/p>\n
<\/p>\n
Sign up for our free newsletter to receive weekly news from BONDWorld. Click here to register for your free copy<\/strong><\/span><\/a> <\/strong><\/span><\/a><\/span><\/p>\n Intesa Sanpaolo – Research Department For professional investors and advisers only<\/strong><\/p>\n The markets already seem to be betting on a favourable outcome, which is changing the balance of risks.<\/p>\n – On Monday, the Eurogroup reached an agreement on a plan to restructure Greece’s debt with the institutions. This is a measure deemed necessary by all and already called for under the second assistance programme. Clearly, it would have been highly unlikely for Greece, even in a distant future, to mange to refinance such a large debt on the market, or even simply reduce it just by maintaining a large primary balance. Although of no particular urgency, as debt-servicing problems would only have become burdensome beyond 2023, a structural solution will allow greater flexibility in covering financial requirements in the next few years, improve access to the markets for Greek banks (which could soon regain access to the ECB’s refinancing operations) and possibly even facilitate the privatisation programme. The plan is based on measures in three main phases. The first, immediate measure, is the reformulation of the EFSF repayment profile and a reduction of the sensitivity to rates of debt service by resorting more strongly to long-term fixed-rate ESM issues, within the limits of the market’s absorption capabilities. The second phase, which will only begin following the conclusion of the ESM programme, provides for early repayment of the more expensive loans issued by the IMF and the other euro area member states under the GLF (Greek Loan Facility), as well as a further rescheduling of EFSF debt maturities. The postponement of this part of the plan to 2018 is probably explained by the German government’s reluctance to make important concessions before the delicate elections to be held in the autumn of 2017. Lastly, further interventions on the repayment plan may be decided subsequently, if the measures already put in place fail to keep the total cost of debt servicing lower than 20% of GDP. Immediate requirements will be funded using 10.3 billion euros in new ESM loans, mostly directed to covering debt maturities (including bonds held by the ECB under the SMP) and repay debts accumulated by the public sector towards suppliers. The unfreezing of loans and the agreement on the restructuring of debt strengthen the position of the Tsipras government, which has to deal with a parliamentary majority that is proving be more disciplined than expected, but remains in any case very slim.<\/p>\n – Another front brought moderately positive news this week: the run-up to the referendum on the United Kingdom’s EU membership. Starting on 15 May, surveys have started to show a slight shift in voting intentions to the advantage of pro-EU positions, to the point that only one survey indicates a slight lead for the “Leave” camp, two point to a draw, and seven place “Remain” in the lead. These movements in public opinion may have been prompted by the intensification of the campaign which stresses the costs of leaving the EU. On Monday, the British government published a report on the near term consequences of Brexit, such as a crash in real estate prices and four quarters of marginal GDP contraction, forcing the government to tighten fiscal policy to safeguard its credibility in the eyes of investors. However, the picture drawn by survey data is still uncertain, considering the lingering difference between the findings of telephone and online surveys, and that the more favourable voting intention polls include a suspiciously low share of undecided voters. Besides, the purdah period has now started that will prevent the government from taking active part in the campaign. What is certain is that the market, also prompted by the odds being offered by bookmakers, has been very quick to react to the improvement. Sterling is now trading at 1.47 US dollars again, pushing the exchange rate against the euro to its lowest levels since the beginning of February. This makes the post-referendum adjustment more asymmetrical, prospecting the risk of a much more violent reaction in case of a victory of the Brexit campaign, rather than of pro-EU voters.<\/p>\n Appendix Important Disclosures<\/strong> Source: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" UK referendum: pro-EU campaign managing to shift public opinion somewhat, but the margin is still too slim for comfort…….<\/p>\n","protected":false},"author":2,"featured_media":3785,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-2036","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/2036","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=2036"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/2036\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media\/3785"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=2036"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=2036"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=2036"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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