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when inflation doesn’t bring blood to the river

Surely they have taken note that in recent times, despite the fact that the Spanish risk premium is rising and is at the highest levels of this month of May, and even of the whole year, there is hardly any talk about it . But it is that something is not news when it is not relevant and, in the case of the differential between German and Spanish debt at 10 years, this importance comes from their levels: reaching 73 basis points in the month is nothing to worry about, and more so, when a year ago we spoke of 117 basis points.

And those levels do not worry, coming from where we come. Even with the lowest levels of the year, in February, with 57 basis points in the risk premium. The fervent support of the ECB is still there, which monolith, without moving. Bond purchases remain and above all, most importantly: the clear message that the horizon remains supportive as long as the crisis lasts. An endorsement with which the financial markets, without breathing easy, we see that they move with a certain tightening of the spreads, in those 20 basis points increased in 3 months, but with which they can coexist.

Risk premium 1

Risk premium 1

Source: Infobolsa

The major tensions were abated in April, in its last ten days, once the harsh German Constitutional Court endorsed the legality of the European Recovery Fund. There the tension for the spreads lost strength and therefore the premiums were relaxed. And it is that we remember that it could have been a more than important setback, although the community money tap still has to be endorsed by each and every one of the national parliaments.

The new focus of concern comes from inflation, which has been talked about so much. Finally, the American T-Note reached 1.70% profitability that it had not reached since March, from where it is already falling, on account of that 4.2% price increase in the last month in the United States, the largest rebound that has been remembered from nothing less than September 2008. Not expected, less shocking, especially if it beats it was discounted in negative.

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That in the case of the general index, in the underlying index, which does not take into account neither fresh food nor energy, the most volatile aspects of prices, rose to 3% with levels unknown in 15 years. And although it was higher than expected and raised the German Bund, with very low negative levels for what is already usual, and placed the Spanish risk premium at November levels, there does not seem to be an alarm in the market, although there is caution.

Risk premium: when inflation does not bring blood to the riverRisk premium: when inflation does not bring blood to the river

Risk premium: when inflation does not bring blood to the river

Source: Infobolsa

It also happens that there is no dysfunction between the movement of the returns of the Spanish and German 10 years, compared to the imbalances that we have seen previously and that have raised the Spanish premium on previous occasions. Not this time: the inflation effect has been the same throughout Europe. Also the general tightening of premiums makes those of Italy and Greece rise, the highest, but as I say, without the blood, at least for the moment, reaching the river.

The experts return on seasonal and temporary factors to talk about these price levels and think that they will be corrected in the medium term. In addition, the central bank effect continues to weigh heavily: the FED reiterates that there will be no increase in interest rates as inflationary pressure is considered temporary, and the market, without breathing completely calm, does not put important patches on the situation. Hence, our risk premium does not drop to 55 basis points and slightly exceeds 70 bp.

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