UBS: EU debt selloff excessive; Ukraine remains key risk
The Swiss bank sees funding risks for EU bonds as limited but notes Ukraine is a key medium-term risk, with a potential $30-$35 billion funding gap for Kyiv in 2027.
7% Euro zone bond spreads widen, oil up Wall St futures edge lower Welcome to the home for real-time coverage of markets brought to you reporters. You can share your thoughts with us at. Eu Debt Selloff Overdone, Ukraine Still Key Risk, Says Ubs While much of the focus has been on the growing risk premium investors demand to hold French and other euro zone sovereign debt over German Bunds, UBS has taken a look at what recent volatility means for EU bonds themselves.
The Swiss bank notes that a flight into safer German debt, concerns over future Ukraine funding, France, and negotiations over the bloc's long-term budget, have pushed the 10-year EU-Bund spread to nearly 60 basis points from 39 bps in September. UBS says the move has gone too far. It argues funding risks remain limited given the Commission's unchanged 180-billion-euro issuance target for 2026 and sizeable liquidity buffers, though Ukraine remains a key risk over the medium term. While existing programmes appear sufficient for 2026, UBS notes IMF estimates point to a $30-$35 billion funding gap for Ukraine in 2027, raising questions about future EU needs.
Yet, strategists Annalaura Capuano and Reinout De Bock expect part of the recent widening to reverse, arguing the market has become too pessimistic. "EU bonds increasingly exhibit the characteristics of a AAA sovereign asset, but still lack the liquidity ecosystem of Bunds. " (Danilo Masoni) *** Earlier Live Markets Posts: European Stocks Join Euro Lower, French Bonds Sell Off Click Here Europe Before The Bell: Not Quite As Bullish Click Here Morning Bid: Who's The Boss? Click Here