BlackRock Inc. favors peripheral European debt in 2013, the world’s largest asset manager said today in a conference in New York. The European Central Bank will eventually activate its Outright Monetary Transactions, or OMT, according to Ewen Cameron Watt, chief investment strategist of the BlackRock Investment Institute.
Spanish government debt has gained 4.6 percent this year, while Italian bonds have returned 19 percent, according to Bank of America Merrill Lynch index data.
On peripheral European debt:
“As far as European euro-zone peripheral bonds are concerned, fiscal adjustments in Spain and Italy have already taken those countries pretty close to primary balances, fiscal balances and primary fiscal surpluses. In the case of Italy, almost beyond the point that they need to get debt sustainability. Spain has a bit further to go.”
On the ECB’s OMT:
“Yes, OMT will have to be triggered at some point because the monetary systems are still way apart from each other and the convergence that Mario Draghi talked about when he brought OMT up has not yet happened enough in terms of short-dated money systems.”