Inflation data in the peripheral countries, published over the past few weeks, highlighted some interesting trends. For example, inflation in Ireland was a negative 20-second consecutive month, noting the drop in prices of 4.1% from the peak in mid-2008. By some estimates, this reflects only part of the necessary adjustments, if Ireland wants to return to competitive positions in the euro area. CPI release in Portugal yesterday (an increase from 1,9% to 2,3%) means the excess of the peak levels in mid-2008.
Risk of peripheral bonds. At mid-year we saw growth in concerns about risks in the banking sector on the peripheral of paper that just fell. For example, stress tests conducted earlier this year showed that the Royal Bank of Scotland (which is itself 80% owned by the state) has about 4 billion euros of debts of Irish (March 31).
Sales of euros. We noted earlier this week, the risk of selling the Euro Asian central banks, not only directly because of fear of sovereign risk, but also forced the sale of peripheral debt, which was likely the cause of the last sale. Keep in mind that central banks (including NSC) participated in the purchase of Greek debt securities and other countries in the periphery of the eurozone, but the risks of restructuring, we will not be surprised to see a shift in assets, and in the position of foreign exchange component.
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