Spanish Bonds Becoming More Attractive, Pimco’s Bosomworth Says
Feb. 21 (Bloomberg) -- Andrew Bosomworth, a fund manager at Pacific Investment Management Co., talks about the loss by German Chancellor Angela Merkel's party in Hamburg state elections and the implications for bond markets. He speaks from Munich with Francine Lacqua on Bloomberg Television's "On The Move." (Source: Bloomberg)
Spanish bonds are “certainly getting better” as a potential investment, according to Andrew Bosomworth, a money manager at Pacific Investment Management Co.
“Real economic progress and healing is starting to take place” in Spain, Bosomworth said in an interview on Bloomberg Television’s “On the Move” with Francine Lacqua. Pimco manages the world’s largest bond fund.
Spain is stepping up efforts to convince investors it can shore up its struggling savings banks without overburdening public finances and avoid following Greece and Ireland in seeking an international rescue. The yield difference, or spread, investors demand to hold 10-year Spanish debt instead of its German counterpart has narrowed 33 basis points this year from the euro-era record of 298 basis points on Nov. 30.
Bosomworth said bonds from Spain may be becoming a better investment than those from Greece and Ireland, and may also post better returns than higher-rated securities given the potential future burdens on German finances from bailouts to stem the region’s debt crisis.
“For the core countries that are going to be writing that big check, the implication is you don’t necessarily want to be located in there,” said Bosomworth, who is based in Munich. “They may be transferring more of their resources to support the periphery. At the very other extreme of the periphery, you still have that restructuring risk. I don’t think you want to be there.”
German Chancellor Angela Merkel’s Christian Democratic Union lost power to the Social Democrats in the city-state of Hamburg in an election last weekend. The loss may weaken Merkel’s position as she negotiates a comprehensive plan to contain the euro-region’s sovereign debt crisis.
Merkel and her coalition partners have opposed issuing joint euro-region bonds, an idea proposed by proposed by some European Union leaders including Luxembourg Prime Minister Jean- Claude Juncker. The SPD has supported issuing such debt.
The Hamburg vote “could have some European implications for the way the crisis is going to be solved,” said Bosomworth. Given the SPD is “pro-Eurobonds, it is going to lead to compromises that will ultimately lead to Germany writing a bigger check.”
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net; Francine Lacqua in London at flacqua@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
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