BlackRock Weighs Spanish Debt Investment at 6%, Pellicciaro Says

BlackRock Inc. is “looking for areas” to make an investment in Spanish debt as the nation is systemically important to the European Union, according to Eric Pellicciaro, the firm’s head of global rates investment.

“We believe the line is drawn with Spain,” Pellicciaro of New York based BlackRock, the world’s largest money manager, said in an interview on “In the Loop” with Deirdre Bolton. “We have no investment in it, but we’re looking for areas to get in should there be some disappointment.”

Spanish Prime Minister Mariano Rajoy made a plea today for help from tomorrow’s European summit. EU leaders meeting in Brussels are due to discuss a plan for closer European integration spearheaded by EU President Herman Van Rompuy that centers on common banking supervision and deposit insurance, along with a “criteria-based and phased” move toward joint debt issuance.

Yields on Spanish notes due in two years climbed to 5.4 percent today, the highest since June 18. Spain’s debt starts “to make some sense” for shorter maturity securities at yields of about 6 percent, Pellicciaro said.

While the interest rate may increase as much as about 1.5 percentage points, “you’re probably going to find some solid support there from policy makers,” he said. “If Spain loses access to the market, I would expect the European Central Bank to come in with emergency measures that the market is not expecting.”

Spanish 10-year bond yields were little changed at 6.9 percent after jumping 24 basis points yesterday, nudging the 7 percent level that forced Greece, Ireland and Portugal to call for sovereign bailouts. Equivalent German bonds yielded about 1.54 percent.

Government debt of Spain has lost 1.4 percent this month as of June 26, compared with a 0.2 percent decline for U.S. Treasuries and a 2 percent drop for German bunds, according to Bank of America Merrill Lynch index data.

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