Halister News

(Bloomberg) -- An escalation of the situation in Greece alongside the U.K. referendum on EU membership in the summer could drive peripheral spreads wider, euro lower and increase volatility in the single currency, Barclays analysts write in client note.

• Greece’s next scheduled significant outflows are due in June and July with EU750m due to the IMF and ~EU2.3b due to the ECB
  • The July repayments appear challenging if there are no further ESM disbursements
• In rates, wouldn’t expect the market reaction to be of the same magnitude as earlier in the crisis but developments may add to risks such as political uncertainty in Spain and fears over the referendum which seem likely to be the key driver of EGB spreads, rates strategist Huw Worthington writes
• Any re-emergence of Greek solvency concerns, either as a result of Greek political instability or an acceleration of tensions between Greece and its creditors, would likely further highlight the lack of an adequate political risk premium built into the Euro, FX strategist Nikolaos Sgouropoulos writes
• For now, seems unlikely to materially weigh on EUR/USD as further position unwinds and home bias will likely to keep the single currency supported in the near term
• NOTE: Merkel rules out Greek debt cut even as IMF has said will only lend to the country with debt relief; Greek FinMin Tsakalotos says he hopes govt can agree on review statement by Sunday