BlackRock Inc. (BLK) is “comfortable” holding Spanish and Italian bonds amid optimism that European policy makers will resolve the region’s financial crisis, according to Rick Rieder, the firm’s chief investment officer of fundamental fixed-income.
BlackRock, the world’s biggest money manager with $3.68 trillion in assets, is buying sovereign debt of the nations after taking comfort in European Central Bank President Mario Draghi’s statement on Aug. 2 that the central bank may buy the securities in conjunction with euro-area bailout funds.
Policy makers are “moving toward a coordinated plan,” Rieder said during an interview on Bloomberg Television’s “InsideTrack” with Deirdre Bolton “And what Dragi said, we thought it was a very big deal.”
Spanish and Italian 10-year bond yields have fallen since Draghi’s pledge, with Spain’s 10-year yield sliding 75 basis points, or 0.75 percentage point, to 6.43 percent, and comparable Italian debt falling 65 basis points to 5.63 percent.
German 10-year bunds dropped as Chancellor Angela Merkel signaled support for the ECB’s plan to help reduce indebted countries’ borrowing costs and attach conditions to the providing the support. Spanish Prime Minister Mariano Rajoy reiterated that he is considering requesting purchases.
BlackRock’s Rieder said he expects a lot of volatility in the news cycle as policy makers work their way through the regions problems.
“We are not going to straight line to nirvana in terms of where we are going,” Reider said “You can’t add much, but we are adding at the margin.”
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