Kicking the can down the road
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KICKING THE CAN DOWN THE ROAD
Many investors are underweight French bonds in the aftermath of a shock snap election, but one has gone further.
The day after President Emmanuel Macron called the election, James Athey, who recently joined asset manager Marlborough from Britain's abrdn, sold not only his French government bond holdings, but also those of Spain, Belgium and Italy, leaving only Germany in the euro zone.
Unlike Athey, who runs an aggregate fund, many investors cannot divest completely because they follow government bond benchmarks where the country holds significant weight, given that it is the euro zone's largest bond market.
Athey's view also contrasts with market optimism on the bloc's periphery, betting contagion from France will be limited -- Italy's spread over Germany rose to around 160 bps last week, far below levels that prompt concern.
The recent French turmoil has reinforced Athey's long-standing concerns about the euro zone's economic architecture.
"I think risk is mispriced in the euro zone frequently because of, amongst other things, ECB intervention," he said.
"Those things which are required to keep the euro zone together in the short term, by definition, weaken it inherently in the long term."
"That constantly kicking the can down the road, constantly sweeping things under the carpet, temporarily suspending the rules of discipline, all of these things... (are) pushing these countries away from one another."
(Yoruk Bahceli)
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EARLIER ON LIVE MARKETS:
TOUGH TIMES ARE NOT OVER FOR EUROPEAN AUTOS - CITI CLICK HERE
HAVEN BRITAIN? CLICK HERE
A CLOSER LOOK AT U.S. DRUG PRICING RISKS CLICK HERE
THE GRASS IS GREENER TODAY IN EUROPE CLICK HERE
SUNNY START IN EUROPE CLICK HERE
POWELL SPARKS OPTIMISM ON RATE CUTS CLICK HERE
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