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European Bond Markets Seen Resisting Contagion From Turkish Woes

  • Selloff in periphery debt may be overdone as bank risk limited
  • Danske recommends buying Spanish bonds, Mizuho likes France
Frankfurt Stock Exchange Reaction To Article 50 Trigger
Photographer: Krisztian Bocsi/Bloomberg
Updated on

Fears about contagion from Turkish turmoil may be overblown for bonds in Europe.

While a slide in the lira prompted traders to shun the debt of Europe’s periphery from Portugal to Greece amid concern that banks may be exposed to Turkish assets, strategists see any spillover as limited. Politics is keeping Italy’s bonds risky, yet broader European exposure is likely to be mitigated by currency hedging and the improved health of the region’s lenders, according to Morgan Stanley and Danske Bank A/S.