The sovereign debt crisis in Greece seems to have turned a corner with the announcement of another European Union bailout, albeit one that involves potentially steep losses for bond investors.
The question for the expert panel this week:
How would the resolution of the euro-zone sovereign debt crisis affect regional bond markets?
Sen Sui (head of Asia, markets and investment solutions, Credit Agricole Private Banking) says most bonds in Asia are issued in US dollars, which are affected more by the movement of US Treasuries than the euro-zone sovereign debt.
'Therefore, the impact of the euro-zone sovereign crisis will be more on the risk-seeking sentiment of investors,' he says.
Sui adds that, while the recent euro-zone summit has provided a relief for Greece, the sovereign debt crisis in the euro zone is unresolved. Add the risk of a US default, and Sui suggests people hold gold instead of 'risk-free assets' such as the German Bunds or US Treasuries, which 'are also sensitive to inflationary pressures and political issues surrounding debt treatment'.
Magdalene Teo (senior analyst, fixed income research, Bank Julius Baer) says the beneficiaries of the EU ministers' package are the sovereign bonds of peripheral nations, bonds of banks in these countries and bonds of banks elsewhere that are exposed to them.