European monetary union

All eyes remain on anecdotal news on how depositors in Greece and outside the country are reacting to the recent events. In terms of economic data releases, the main focus will be on flash PMIs for May.

New elections have been called in Greece and so we look at the timeline of what might happen in the coming months and the consequences if a solution to Greece’s problems is not found.

With market strains increasing rapidly, the ECB remains the one with the capacity to react fast. After the ECB has acted first to try to bring some calmness to markets, something could happen on the government front as well.

Today’s key figure relases showed a somewhat better growth performance for the Euro area as a whole than expected.

Greek elections and contagion risks still the major story. We are keeping our forecasts basically unchanged.

The Greek situation will continue to grab the headlines. Euro-zone Q1 GDP will likely confirm the zone has fallen into another recession, while US April retail sales growth likely weakened notably compared to March.

State Treasury Finland will re-open RFGB 1.875% Apr 2017 on Monday, 14 May 2012. With short rates virtually at zero, the search for pick-up in definitely on. We find maturity extensions from shorter German, Dutch and Finnish bonds into the 5-year Finnish auction bond attractive.

News that the Democratic Left have tentatively agreed to participate in a grand coalition offers hope of a new Greek government being announced this weekend.

According to the Financial Times, Spain could be offered an extra year to hit the 3% of GDP deficit target. This is likely a step in the process, where the strategy of front-loaded austerity measures is rethought and economic growth given a higher priority.

With German bonds enjoying strong momentum, yields could fall even further. The pricing of a risk of some sort of a Euro-zone break-up will likely increase on the back of the Greek situation, while the Spanish situation continues to be another source of uncertainty.