Halister News

(Bloomberg) -- European risk assets look attractive and have room to gain, Dierk Brandenburg, sovereign analyst at Fidelity International, says in interview on Tuesday.

• Among peripheral bond markets, Brandenburg favors Italian and Spanish debt
• NOTE: Fidelity’s Luxembourg-based Euro Bond Fund holds BTPs due from 2019 to 2044, with the biggest exposure to 2024 maturity, Bloomberg data show; fund also holds Spain 2020, 2024, 2044 debt
• Brussels attacks raise questions over progress on any agreement on Europe’s refugee crisis, though underlying European fundamentals aren’t as bad as they appear; European spreads are cheap
  • Attacks will probably cast a shadow over Europe’s future and may have longer-term impact on consumer confidence and GDP; that said, ECB easing plays in favor of growth
• Risk-on environment may worsen into June 23 referendum on U.K. EU membership, amid increased uncertainty in U.K. and Europe outlook
  • Would favor neutral stance on gilts into vote as they have already rallied a lot, reflecting “Brexit” risk, expectations for slower U.K. growth and no BOE hikes anytime soon
• NOTE: Fidelity’s Luxembourg-based European High-Yield Fund holds Greek 2028, 2029, 2019 bonds: Bloomberg data
• Brandenburg says fund exposure to longer-term Greek bonds reflects lower cash prices; also reflects view that long- term bonds are likely to repay the same amount as more expensive shorter-term ones, in event of a debt restructuring
  • For Greek bonds to become attractive again, country has to show it’s willing to cooperate with Europe on refugee crisis; geopolitical factors probably more important than domestic issues currently
• NOTE: Fidelity AUM at $258.4B as Sept. 30, according to website