Euro area periphery data continues its improvement and most sovereign yields are now touching historical lows (10Y) . Survey data remains at relatively high levels and the improvement is also seen in hard data as all countries excluding Greece have ended their recessions. There is room for further progress in domestic demand.
The short-term outlook seems less challenging than it has been for a long time, and, in line with that the widespread improvement, economic sentiment appears to be more robust. Although we have seen a very good performance in the peripheral markets since the start of the year, there is still plenty of performance left, see Government Bonds Weekly: Still plenty of room for the periphery to perform .
We look for a continued gradual improvement . The return of confidence is expected to result in a recovery in domestic private sector demand this year. In our view, there is upside risk to growth in the periphery as we expect pent-up demand in investments and durable consumer goods to boost growth.
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