Western Asset Management increases exposure to Italian and Spanish bonds due to better prospects for meaningful ECB stimulus Hong Kong, 30 October 2012: Western Asset Management, the fixed income affiliate of Legg Mason, has eliminated its underweight to Spain and moved to an overweight exposure in Italy in

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18 Νοε 2013 (πριν από 3 χρόνια και 8 μήνες)

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Western Asset Management increases exposure to Italian and Spanish bonds due to better
prospects for meaningful ECB stimulus





Hong Kong, 30 October 2012: Western Asset Management, the fixed income affiliate of Legg
Mason, has eliminated its underweig
ht to Spain and moved to an overweight exposure in Italy in
light of the more balanced probability of risks and cheaper peripheral valuations.





“We remain encouraged by Italy’s progress in its structural reforms and with Spain’s progress in
reducing its

deficit, albeit over a longer time span. The continuing fiscal drag in Europe will
remain a source of risk for markets, but politicians’ and central bankers’ policy response is
becoming more coordinated, with growing prospects for meaningful stimulus from

the ECB,” says
Mike Zelouf, Director at Western Asset.





However, Western Asset is still not ready to move to a more meaningful overweight in peripheral
European exposure despite the recent removal of a number of political risks, as valuations in
periph
eral Eurozone markets now offer less of a cushion for the considerable policy
implementation and other economic, social and political risks that remain.





“The recent narrowing in economic divergence between the eurozone core and the periphery raises
the

risk of ‘bailout fatigue’ by northern European politicians. With less pressure from markets in
the wake of the ECB’s recent policy actions, there is also a risk of slower progress in addressing
the structural imbalances at the heart of the eurozone crisis
. The approach of Italian elections next
spring, German federal elections in September 2013 and the recent doubts over the direct
recapitalization by the ESM of Spain’s ailing banks make even more critical the ECB’s ability to
intervene in peripheral euroz
one bond markets.” says Zelouf.





Zelouf also notes that a European banking union would help sever the corrosive link between
banks and sovereigns, although there are considerable political and operational challenges to its
implementation.





Elsewhere,

Western Asset expects moderate growth in the US economy, supported by a recovery
in housing and highly accommodative monetary policy that now explicitly links future policy
action to a recovery in the labor markets and the economy. It also sees scope for
a modest
acceleration in China’s economy with the help of policy measures and lower inflation, and
believes that Brazil’s economy is also poised for firmer growth as interest rates have been cut
sharply in recent quarters and government policy is focused o
n improving the country’s
infrastructure.





This press release is distributed through Edelman Public Relations on behalf of Western Asset.