Investors should buy Irish 10-year government bonds and sell Spanish securities because Ireland has less debt to sell the rest of this year and its exports may help the economy grow faster, Deutsche Bank AG said.
"Ireland offers better risk-reward perspective relative to Spain," Deutsche Bank analysts including Abhishek Singhania in London wrote in a note dated January 15th. "Even if domestic demand does
not recover and fiscal consolidation limits government expenditure, the Irish economy could continue to grow, unlike the Spanish economy."
Ireland has sold about 25 per cent of the bonds it needs to issue this year, compared with 9 per cent
for Spain, the analysts said.
Investors should buy the Irish 10-year security due in October 2020 and sell the Spanish bond maturing in April 2020, betting that the difference in yield narrows to about 50 basis points, the analysts
said. They should end the bet if it widens to 120 basis points.
The Irish bond yielded about 95 basis points more than the Spanish security today.
Bloomberg