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Alternative Market Briefing

BlackRock favours short durations in European bonds

Friday, January 20, 2017

Benedicte Gravrand, Opalesque Geneva:

The ECB's no-change policy was expected, comments Marilyn Watson, head of global fundamental fixed income strategy at BlackRock, the world's largest asset manager.

The European Central Bank (ECB) decided on 19 January that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility, and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. It said it expects the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

The Bank reiterated a decision taken in December that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of euro 80bn until the end of March 2017. From April to December (or beyond), the monthly rate will be euro 60bn.

ECB president Mario Draghi noted that there is no convincing upward trend in underlying inflation, despite improving data.

BlackRock has diversified positions in Europe, but with mainly in short durations, Watson says. "Within the eurozone, we are positioned for a steeper German Bund curve and are short or underweight French government bonds versus Bunds. In contrast, we ar......................

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