2012 was a tough year for some European government bond markets (Spain +100bps). Even with the rallies of the last few months, we remain dramatically wider than at the beginning and primary issuance is becoming increasingly reliant upon domestic bank reacharounds and/or ECB handouts. UBS expects 2013 to be similar in terms of gross supply to 2012 (around EUR 772bn) and aggregate net supply to fall slightly to EUR 208bn. However, these modest improvements overall (driven by drops in France, Germany, and Holland gross issuance) hide the biggest concern. Spain's gross (and net) issuance is likely to rise to EUR 124bn in 2013 (up 20% over 2012!) and Italy's net supply will rise notably next year (even with significant redemptions). Portugal, also faces a very significant increase in net supply in 2013.
Aggregate Net and Gross Issuance expectations for 2013...
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and Changes from 2012... with Portugal facing some stress too
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and we bet you never knew Poland dwarfed Greece in the recipient-of-EU-Aid department in 2011! (via Bloomberg)...
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It would appear average durations of government debt in Europe will be shrinking in 2013...
Source: UBS and Bloomberg