Deutsche Bank AM Favors Corporate Bonds as ECB Starts Buying
(Bloomberg) -- Deutsche Bank Asset Management favors euro investment-grade bonds over other asset classes, citing the ongoing economic stabilization, low default rates and the start of the ECB corporate-bond buying program, according to note.
- Also favors covered-bonds market, “heavily influenced by the ECB as well”
- Expects little new bond issuance in coming months; issuers are instead using ECB’s “generous” TLTRO facilities, which indirectly takes pressure off the secondary market
- Period of USD weakness vs EUR “has come to an end”
- Better U.S. macro data, increasing inflation, relatively benign global risk environment open door to Fed rate hike; at the same time, expansive ECB policy, Brexit risks weighing on EUR
- Neutral U.S. stocks: earnings set to improve this year and swing back to showing year-on-year gains in the second half of 2016. However, this risks being jeopardized by Fed
- Neutral U.K. stocks: under the spell of the Brexit referendum, but bigger cos. with a global reach would be less affected than smaller cos. focusing on the domestic U.K. market
- Neutral EM stocks: risk-return profile improved in comparison to sluggish developed markets; valuation discount versus U.S. equities, as measured by the price-earnings ratio, is about 35%
- EM markets have passed trough, but still too early to expect sustained upswing of EM equities
- NOTE:
- Deutsche Bank Asset Management manages $842b in invested assets, according to co.’s website
- Earlier: Brexit Concerns Show in European Stocks’ Valuation, Volatility
- June 7: Amundi Has Cut Exposure to European Assets Ahead of Brexit Vote
- June 1: U.S., EM Exposure Best as Earnings Stalled, Says Natixis’s Goyon
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HALISTER1Source: BFW (Bloomberg First Word)
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