21 February 2017
visit dh.com

SunGard models euro breakup impact on asset classes

03 February 2012  |  6189 views  |  1 euro

A Piigs exit from the single currency would bring a 40% drop in euro yield curve and 20% fall in euro equities, according to modelling from SunGard's APT risk system.

SunGard has put together five euro breakup scenarios - ranging from the departure of Greece to a complete colllapse of the currency - in a bid to predict the likely effects across asset classes.

The departure of Greece and Portugal would lead to a 15% rise in the euro against the dollar, a 20% fall in eurozone yields, a 15% fall in eurozone equities and a 20% increase in credit spreads.

In contrast, if the Piigs (Portugal, Italy, Ireland, Greece and Spain) all left we would see a more pronounced effect, with a 25% rise in the euro against the dollar, a 40% drop in the euro yield curve, a 20% drop in euro equities and a 15% drop in US equities.

In addition EU banking stocks would fall by 25% and Itraxx Financials credit spreads would increase by 100%, which would imply downgrades and losses of up to 20% in high-grade corporate debt, says the model.

The worst case scenario, a total collapse, would see European equities down 40%, US and global equities down 30%, euro yields down 75% and Itraxx Europe and Itraxx Financials credit spreads up 150% and 200% respectively.

Oil would fall across the scenarios, ranging from five per cent from a Greece departure through to a 50% decline from a complete breakup. Sterling would strengthen against the Euro by between five per cent and 25% across the scenarios.

SunGard is not alone in modelling the potential for a eurozone break-up. Firms such as Icap and industry utilities like CLS have initiated scenario planning in the event of a major soveriegn default and subsequent euro exit. Banknote printers also report that central banks have been scouring the market for printing presses capable of running large stocks of once-defunct currencies.

Laurence Wormald, head, research, SunGard APT, says: "It's important to realise that this is not a black swan, it's a widely discussed possible event, and while unprecedented it can't be classed as very improbable, nor would it be rare. Since 1945, 87 countries have left currency unions. We're not analysing the probability of breakup, but the likely consequences it would bring, helping investors make contingency plans."

Comments: (1)

Cristian Vlad
Cristian Vlad - Consult Services Ltd - London | 06 February, 2012, 09:47


As a professional, I would also be interested to see the scenario where Germany would leave the euro.  And the resulting scenario should also include the new DM values.


Thank you,


Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board: sign up now

Related stories

SunGard to buy Swift service bureau Syntesys

SunGard to buy Swift service bureau Syntesys

19 September 2011  |  5753 views  |  1 comments

Related company news


Related blogs

Create a blog about this story (membership required)
Visit capgemini.comvisit BNP paribas

Top topics

Most viewed Most shared
IBM and Visa join forces to turn billions of connected devices into points of saleIBM and Visa join forces to turn billions...
16514 views 11 comments | 52 tweets | 85 linkedin
Nesta launches £5 million Open API challengeNesta launches £5 million Open API ch...
10234 views comments | 21 tweets | 19 linkedin
Jaguar embeds payments into digital dashboardJaguar embeds payments into digital dashbo...
9948 views comments | 49 tweets | 57 linkedin
The fintech effect: Banks buy in to benefits of boosting financial well-beingThe fintech effect: Banks buy in to benefi...
9184 views comments | 17 tweets | 12 linkedin
hands typing furiouslyBlockchain - The Next Banking Blockbuster?
8103 views 0 | 12 tweets | 7 linkedin

Featured job

Six Figure Base + Commission + Stock Options

Find your next job