BlackRock adds Spanish and Italian government bonds to fixed income portfolios

Despite a cautious approach to southern European markets, over the last weeks BlackRock has bought short-dated Spanish and Italian government bonds.

The strategy marks a shift in the approach of the asset manager, which over the last year had limited its exposure to peripheral eurozone debt markets.

Speaking to the Wall Street Journal, Rick Rieder, chief investment officer for fixed income and fundamental portfolios at the company confirmed the purchase, adding that eurozone holdings account for a small portion of the $620bn fixed income assets.

The decision to enter peripheral European markets again has been driven by more credible efforts by political leaders to contain the debt crisis since late June.

At the June European Union summit, European Central Bank (ECB) President Mario Draghi said the bank would have been able to buy short-dated Spanish and Italian bonds, following an official request for financial assistance from the European Union’s bailout funds.

Further investment decisions will be driven over the next months by the policy direction assumed of the ECB and the US Federal Reserve.

According to Rieder, the biggest risk for junk debt lies in another deterioration in the eurozone crisis or a downturn in the US economy with a further push towards recession.

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