Citi forecasts a yield of for 10-year Greek bonds of 4.75 in the second quarter of 2019, rising to 4.8 percent by the third quarter and 4.85 by the end of next year and up to 4.9 percent in the first quarter of 2020.
The international banking and investment group forecasts a similar trend for Italy’s 10-year bonds, reaching up to 4.15 percent in the first quarter of 2020.
Citi also forecasts that the spread between Greek and German bonds will exceed 400 basis points by the end of 2019; 325 for Italian bonds.
At the same time, Citi forecasts a primary budget surplus of 3.5 percent of GDP in 2019, in line with the ambitious fiscal target agreed-to by the Tsipras government in negotiations mid-way through the third memorandum.
The same figure eases to 3.3 percent in 2020; 3.2 percent in 2021 and 3 percent in 2022,
Finally, Citi says a willingness, on the part of European creditors, to continue to support Greece by possibly agreeing to lower annual primary budget surplus targeted, if the current ones appear unreachable, will be a deciding factor in forecasts over whether or not the Greek state will meet its obligations.
