Halister News

(Bloomberg) -- Bonds from India, Turkey and South Africa are currently more attractive than European and U.S. HY debt, as the high demand for assets from these emerging markets helps check any volatility in their currencies, Richard Hodges, manager of Nomura Asset Management’s Global Dynamic Bond Fund, says in interview.

• Hodges has 7.5%-8% of his fund’s holdings in the so-called Indian Masala bonds -- rupee debt issued offshore
  • “I much prefer to have 7% in India Masala than in U.S. or euro HY; it’s a much safer asset”
• “Any volatility in these countries’ currencies because of political instability is short-lived, which reflects the demand for assets” from emerging markets
• Says his HY holdings are “very focused,” with a bias toward companies based in peripheral euro area -- Italian, Spanish and Portuguese names -- “because I believe in the dynamics of those improving economies”
• The fund has a “reasonable exposure” in bonds of Spanish construction company Aldesa; “dynamics are improving, they are winning contracts that will be beneficial to the balance sheet, and the bonds are trading at very distressed levels”
• Sees “great opportunities in the Irish banking sector”
• Expects that after German and Italian elections “there is going to be much more talk about the introduction of euro bonds, as part of increased rhetoric regarding greater fiscal integration”
• On U.S. Treasuries, “one could very much argue that the concerns about North Korea have been discounted already in U.S. bond yields. Ten-year yields could well go to 2%, and at that point you’d probably want to buy puts on bond markets to express Treasury yields going back up to 2.25%”
• In German government bonds, the fund is “significantly long call options”

--With assistance from Erhard Krasny, Joerg Engelbert Jaeger and Lukanyo Mnyanda. To contact the reporter on this story: David Verbeek in Frankfurt at dverbeek1@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Anil Varma