BlueBay adds French, Italian debt exposure
TLT•BlueBay has recently increased its exposure to French and Italian government debt. Fixed income CIO Mark Dowding said the firm is relatively constructive on European yields and sees a tactical opportunity in French bonds.
1. BlueBay increases exposure
BlueBay has recently added to its exposure to French and Italian government debt, fixed income CIO Mark Dowding said. He said the economic outlook has left the firm relatively constructive on European yields.
2. Inflation and bond spreads
Dowding said inflation might be back below the European Central Bank’s 2% target in a year as base effects reverse. He said markets may be underestimating the chance of one more ECB rate hike in December, followed by easing next year.
3. Tactical opportunity in France
Dowding said higher energy prices had put upward pressure on euro sovereign bond spreads, leaving France and Italy potentially among the largest beneficiaries if that reverses. BlueBay remains structurally more bearish on France, but he said broad investor short positions in French bonds could create a tactical opportunity if spreads narrow over the next couple of months.
