Invesco backs this fixed income play, as investors hunt non-U.S. safe havens
A fund manager at Invesco has said she sees value in German bunds over U.S. Treasurys, as investors look to diversify their assets to protect their portfolios. Speaking with CNBC’s ‘Europe Early Edition’, Alexandra Ivanova, a manager for IFI Europe at Invesco, highlighted a major ongoing secular trend away from U.S. assets and Treasurys among global investors, and pinpointed German government debt as an attractive alternative. “Given that we need some kind of safety assets outside of Treasurys, and given the size and liquidity of Treasurys, it’s difficult to find an asset class to replace that,” Ivanova explained. DE10Y 1M mountain 10-year German bunds. “Bunds are one of the few assets that could act as a replacement… especially given there’s going to be more issuance. At the moment, the market is more fretting about more issuances and lack of demand.” She added: “My view is that in the longer term, if investors are looking for safe assets outside of U.S., bunds could act as an alternative.” Yields on 10-year bunds , the benchmark for Germany’s government debt, stood at 2.8157% on Thursday morning, down from 2.8623% week-over-week. Ivanova said the “starting point” for bunds is fundamentally “quite healthy”, with debt levels in Germany still low. “Controversially, I would say that more issuance is good for investors at a time when there is going to be an increase in total demand,” she said of the bund market. Renewed geopolitical upheaval has underscored markets just one week into the new year. The overthrow of Venezuela’s president Nicolas Maduro, rising tensions over Greenland , and the de-dollarization trend have brought portfolio diversification into sharp focus, and the need for investors to put assets to work beyond the U.S. “At the same time, I give credit to the U.S. economy for being so much stronger and resilient,” Ivanova said, adding that having both bunds and Treasurys “makes sense” for a portfolio. Elsewhere within the fixed income sphere, Japan remains “attractive”, Ivanova said, while the front-end of the U.K. gilt market “is also looking good” due to expectations of further interest rate cuts from the Bank of England.
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