"Investors are all aboard the periphery train, and there's now simply no margin for error," says BAML's Obe Ejikeme, commenting on his firm's fund manager survey for May. A net 36% of the respondents say they're overweight eurozone stocks, up from 30% in April, with the equities of Spain (EWP) and Italy (EWI) are preferred to those in the core.
Ejikeme also calls long bets in EU periphery debt the most crowded traded globally. Indeed. Spanish 10-year debt is now priced to yield 2.93%, Italy 2.97%, Ireland 2.67%. As comparison, U.S. 10-year Treasurys yield 2.63%.