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JPM’s bond chief: Spain could be ‘Europe’s next great success story’
by Robert St George on Oct 23, 2013 at 07:32
Nick Gartside, chief investment officer for JP Morgan’s global fixed income group, has tipped Spanish debt to perform strongly despite widespread fears about the country.
‘Spain is probably Europe’s next great success story,’ Gartside (pictured) told Wealth Manager. In particular he expected Spanish government bond yields to fall 0.5% ‘at a minimum’ and up to 0.75% over the next year.
Gartside characterised Europe as facing three principal and connected problems: fragile banks, stressed sovereigns, and weak public finances.
For Gartside, the European Central Bank has helped to assuage fears about the first two issues, through the longer-term refinancing operation and ‘jawboning’ respectively.
The question of weak public finances ‘is the variable’, Gartside acknowledged, and he felt they could take ‘a decade if not longer’ to resolve across the continent.
However, Gartside noted that Spain had managed to swing from an 8% current account deficit to a surplus now by ‘internally devaluing’ to make itself more competitive.
Growth and unemployment were still concerns, Gartside recognised, but he said that they were less important for bond investors. For example, the disinflationary pressures created by such an environment are traditionally positive for fixed income.
Within Spain, Gartside has invested in both government and corporate debt, including in financials. In that sector Gartside confirmed that his preference was for national champions such as Santander, which is also less exposed to the domestic economy.
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