CaixaBank SA’s investment-fund manager, Spain’s largest, is waiting for Greece to reach a solution with European creditors before increasing its wager on Spanish and Italian government bonds.
As Greece faces a decisive week in its negotiations, InverCaixa’s forecast is that an agreement will be set with other European Union members, possibly at the last minute. Madrid-based InverCaixa has 39 billion euros ($44 billion) in mutual funds.
“The aim of Greece and the EU needs to be for an agreement to be reached, even on some minimum points,” said Guillermo Hermida, InverCaixa’s chief investment officer, in an interview at his office in Madrid last week. “That will calm down the markets and would help the Spanish risk premium go back to the 100 basis-points level.”
The difference between the Spanish 10-year bond and the German one widened last week to 176 basis points, or 1.76 percentage points, from a one-year average of 123 basis points, as concern of a possible exit of Greece from the euro region spread in markets.
Italian and Spanish debt jumped in price on Monday after a new proposal from Greece’s government surfaced, hours before European leaders were to hold emergency meetings. Yields on their 10-year securities opened down 11 basis points, and 10 basis points, respectively.
“We think the euro project will move forward and that there will be no problem with Greece paying back its debt, so the premium for investing in Spanish bonds versus German ones will pay off,” Hermida said. He didn’t disclose the current holdings of Italian or Spanish debt.
For its investments in Spanish bonds, Hermida prefers the longer maturity ones, since he says the European Central Bank’s quantitative-easing program has made the short bonds lose all attractiveness. He sees the 10-year U.S. Treasury bond at levels of 2.50 percent to 2.75 percent by year-end and the 10-year German bond in the 1.20-1.50 percent range.
InverCaixa became Spain’s largest asset manager earlier this year after it included assets from Barclays Plc, following the purchase of the Spanish unit of the British bank by CaixaBank. Barclays fund managers in Spain joined InverCaixa staff, which has 160 people, 60 of whom are fund managers.