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The Star
2 hours ago
- Business
- The Star
Europe's born-again bonds
FIFTEEN years ago, Guillermo Felices was helping clients navigate Europe's sovereign debt crisis. Now, he's extolling the bonds once at the centre of that storm. Italy, Spain, Ireland, Portugal and Greece, which nearly collapsed under the burden of their debt in 2011, have since transformed into top picks for firms like PGIM Fixed Income, where Felices works as a London-based investment strategist.
Irish Examiner
5 days ago
- Business
- Irish Examiner
One-time bond pariahs like Ireland now go neck and neck with Germany, France
A decade and a half ago, Guillermo Felices was helping clients navigate Europe's sovereign debt crisis. Now, he's extolling the bonds once at the centre of that storm. Italy, Spain, Ireland, Portugal and Greece, which nearly collapsed under the burden of their debt in 2011, have since transformed into top picks for firms like PGIM Fixed Income, where Felices works as a London-based investment strategist. His recommendations are emblematic of the historic shift that's taken place in the region's debt-market hierarchy. The recovery in the nations on Europe's periphery has been years in the making and as investors shy away from President Donald Trump's policy making, their bonds are increasingly being seen as healthy alternatives to the debt of Europe's biggest economies. Spanish, Greek and Portuguese bonds now all yield less than France. Italy is on course to outperform Germany and France for the fourth year in a row on a total returns basis — matching the longest winning streak on record. 'Post-crisis, the story was always that Europe is going to be difficult to solve,' Felices said, pointing to its history of sluggish growth, excessive public spending and squabbling among member states. 'This is less the case now, especially in terms of fiscal profligacy, while the US is more unorthodox.' US Treasuries have been buffeted this year, most notably in April when Trump unveiled a package of aggressive trade tariffs. Worries over the US fiscal outlook have also flared up. The appeal of the peripheral bonds, meanwhile, is down to a post-pandemic economic recovery that outstripped the gains in the region's economic powerhouses of Germany and France. Spain is a particular bright spot, and is expected to grow around 2.5% this year, more than double the pace of the wider bloc. Investors' exposure to the nations on Europe's fringes remains near the highest levels seen in the past five years, according to a monthly Bank of America survey. Another key turning point came in March, when Germany abandoned decades of fiscal austerity and vowed to plow billions of euros into defense and infrastructure. While that's seen as a vital catalyst for EU growth, the coming deluge of German bonds has made some investors cautious and damped prices for the nation's debt. 'We prefer countries with strong growth and which haven't committed to raising defense spending as much as Germany,' said Niall Scanlon, fixed income portfolio manager at Mediolanum International Funds Limited. Spain is his 'standout pick,' though he says he has also favored Italy this year. Then there's France, once considered a proxy for Germany in terms of its financial heft, but now a no-go for many bond funds. Investor sentiment soured last year after unbridled public spending left it with the largest deficit in the euro area. Attempts by the government to pass its 2026 budget in the coming months may trigger a fresh bout of volatility. As a result, the difference in borrowing costs between France and Italy has shrunk: investors demand just 12 basis points of extra yield to lend to Italy for 10 years rather than France — the smallest amount in two decades. 'We prefer Italy and Spain over France and Germany,' said Sachin Gupta, portfolio manager at bond giant Pacific Investment Management Co. The periphery's outperformance 'can continue, even after having come a long way,' he added. In a speech in June, European Central Bank official Philip Lane pointed to the relative stability of euro-area bonds this year, even as other debt markets saw significant price swings. That's likely down to factors including inflows from domestic and global investors as they reduced exposure to US assets, as well as a 'shared commitment' to fiscal responsibility across the bloc, Lane said. To be sure, peripheral bonds have already rallied so much that potential returns aren't as attractive as they once were. Greece is a case in point — less than three years ago its 10-year bonds yielded more than 5%. That's since declined to about 3.30%. 'It is undeniable that the heavy lifting has been done,' said Gareth Hill, a senior fund manager at Royal London Asset Management Ltd. And there's still some reticence among US investors to venture into European sovereign markets beyond German bonds, which retain their status as the region's haven asset. Ales Koutny, head of international rates at Vanguard, said that while US demand has picked up, bunds have taken 'the lion's share' of inflows. Still, it's hard to make a case that the periphery nations will fall back into the slow lane, unless there's a fresh economic crisis or sharp lapse in budgetary discipline, according to Royal London's Hill. Kristina Hooper, chief market strategist for Man Group Plc, argues that —with the appropriate vetting — there are plenty of opportunities to be found beyond the traditional core. 'It is the time to diversify away, at least modestly, from the US,' Hooper said from New York. Peripheral countries 'are doing well, and their bonds look far more attractive than they used to,' she said. Bloomberg
Mint
5 days ago
- Business
- Mint
One-Time Bond Pariahs Go Neck and Neck With Germany, France
(Bloomberg) -- A decade and a half ago, Guillermo Felices was helping clients navigate Europe's sovereign debt crisis. Now, he's extolling the bonds once at the center of that storm. Italy, Spain, Ireland, Portugal and Greece, which nearly collapsed under the burden of their debt in 2011, have since transformed into top picks for firms like PGIM Fixed Income, where Felices works as a London-based investment strategist. His recommendations are emblematic of the historic shift that's taken place in the region's debt-market hierarchy. The recovery in the nations on Europe's periphery has been years in the making and as investors shy away from President Donald Trump's policy making, their bonds are increasingly being seen as healthy alternatives to the debt of Europe's biggest economies. Spanish, Greek and Portuguese bonds now all yield less than France. Italy is on course to outperform Germany and France for the fourth year in a row on a total returns basis — matching the longest winning streak on record. 'Post-crisis, the story was always that Europe is going to be difficult to solve,' Felices said, pointing to its history of sluggish growth, excessive public spending and squabbling among member states. 'This is less the case now, especially in terms of fiscal profligacy, while the US is more unorthodox.' US Treasuries have been buffeted this year, most notably in April when Trump unveiled a package of aggressive trade tariffs. Worries over the US fiscal outlook have also flared up. The appeal of the peripheral bonds, meanwhile, is down to a post-pandemic economic recovery that outstripped the gains in the region's economic powerhouses of Germany and France. Spain is a particular bright spot, and is expected to grow around 2.5% this year, more than double the pace of the wider bloc. Investors' exposure to the nations on Europe's fringes remains near the highest levels seen in the past five years, according to a monthly Bank of America survey published on Friday. Another key turning point came in March, when Germany abandoned decades of fiscal austerity and vowed to plow billions of euros into defense and infrastructure. While that's seen as a vital catalyst for EU growth, the coming deluge of German bonds has made some investors cautious and damped prices for the nation's debt. 'We prefer countries with strong growth and which haven't committed to raising defense spending as much as Germany,' said Niall Scanlon, fixed income portfolio manager at Mediolanum International Funds Limited. Spain is his 'standout pick,' though he says he has also favored Italy this year. Then there's France, once considered a proxy for Germany in terms of its financial heft, but now a no-go for many bond funds. Investor sentiment soured last year after unbridled public spending left it with the largest deficit in the euro area. Attempts by the government to pass its 2026 budget in the coming months may trigger a fresh bout of volatility. As a result, the difference in borrowing costs between France and Italy has shrunk: investors demand just 12 basis points of extra yield to lend to Italy for 10 years rather than France — the smallest amount in two decades. 'We prefer Italy and Spain over France and Germany,' said Sachin Gupta, portfolio manager at bond giant Pacific Investment Management Co. The periphery's outperformance 'can continue, even after having come a long way,' he added. In a speech in June, European Central Bank official Philip Lane pointed to the relative stability of euro-area bonds this year, even as other debt markets saw significant price swings. That's likely down to factors including inflows from domestic and global investors as they reduced exposure to US assets, as well as a 'shared commitment' to fiscal responsibility across the bloc, Lane said. To be sure, peripheral bonds have already rallied so much that potential returns aren't as attractive as they once were. Greece is a case in point — less than three years ago its 10-year bonds yielded more than 5%. That's since declined to about 3.30%. 'It is undeniable that the heavy lifting has been done,' said Gareth Hill, a senior fund manager at Royal London Asset Management Ltd. And there's still some reticence among US investors to venture into European sovereign markets beyond German bonds, which retain their status as the region's haven asset. Ales Koutny, head of international rates at Vanguard, said that while US demand has picked up, bunds have taken 'the lion's share' of inflows. Still, it's hard to make a case that the periphery nations will fall back into the slow lane, unless there's a fresh economic crisis or sharp lapse in budgetary discipline, according to Royal London's Hill. Kristina Hooper, chief market strategist for Man Group Plc, argues that —with the appropriate vetting — there are plenty of opportunities to be found beyond the traditional core. 'It is the time to diversify away, at least modestly, from the US,' Hooper said from New York. Peripheral countries 'are doing well, and their bonds look far more attractive than they used to,' she said. --With assistance from Michael Mackenzie, Anya Andrianova and Freya Jones. More stories like this are available on
Reuters
07-08-2025
- Business
- Reuters
VIEW Investors react to news Miran picked by Trump to be Fed Governor
NEW YORK, Aug 7 (Reuters) - U.S. President Donald Trump on Thursday said he will nominate Council of Economic Advisers Chairman Stephen Miran to serve as a Federal Reserve governor. Here are some investor comments about the impact to markets: ANDREW BRENER, HEAD OF INTERNATIONAL FIXED INCOME SECURITIES NATALLIANCE SECURITIES, NEW YORK: "Our view is he is very controversial and will not pass the Senate. He will try to change the Fed. First he has no experience. No street. No business. Always politics." ROBERT TIPP, CHIEF INVESTMENT STRATEGIST, HEAD OF GLOBAL BONDS, PGIM FIXED INCOME, NEW YORK: "So far bashing the Fed this term has been fruitless, or possibly even counter-productive — it certainly appeared to be counterproductive in the December 2018 Trump/Powell episode … Presumably it (Miran's appointment) will have at least a marginal impact — but it will depend on the pliability of the rest of the committee members — which is certainly not a given. Furthermore, as situations evolve, and nominees become acting chairs, there is at least one prominent example of a Fed Chair -- the first appointee following the 1951 Accord, Martin, who worked on the Accord from the administration's side – (who) proceeded in his long tenure to anger more than one president with his tight money policies ... Again, while Trump is likely to choose someone more aligned with his thinking than Powell, the impact may not prove as material as some may fear." RYAN SWEET, CHIEF US ECONOMIST, OXFORD ECONOMICS, PHILADELPHIA: "I don't think it means too much in the context of altering the course of monetary policy. I think the biggest question mark is whether or not he gets confirmed in time to vote at the September meeting. If he does, then that increases the odds that we get three dissents if the Fed opts to not cut in September. I do think the odds of a September cut are rising, not because of this nomination, but just because of the recent data on the labor market." TOM DI GALOMA, MANAGING DIRECTOR OF RATES AND TRADING, MISCHLER FINANCIAL, PARK CITY, UTAH: "Stephen Miran will be good for the Fed because he will probably be inclined to lower rates. And I think he worked in the first Trump administration. So he has been in two Trump administrations. I think it's going to be a long-term deal for Miran and he will be Fed governor for a while. I don't think this is something that they want to do temporarily." JOHN VELIS, AMERICAS MACRO STRATEGIST, BNY, NEW YORK: "A bit of surprise to nominate Miran – he wasn't mentioned as a likely candidate by markets, although he is likely to be a reliable dove, given his current political position (as Chair of CEA) and his public comments to date. "This is a recess appointment, so it does not need Senate confirmation. As far as I understand about recess appointments, they remain valid until the next session of the Senate is complete. "This still doesn't remove the current chatter about Christopher Waller being named Fed Chair to replace Powell." JAY HATFIELD, CHIEF EXECUTIVE OFFICER, INFRASTRUCTURE CAPITAL MANAGEMENT, NEW YORK: "Miran is somewhat unconventional for this job because he was head of the Council of Economic Advisors and has made some controversial or hard to justify comments about forcing people to buy Treasuries, which doesn't make any sense. But I don't think this is going to be relevant to serving on the Fed board." "It's an insider, someone who's willing to take one for the team because it's not that great of a position to be for a short period of time. It's a fairly practical decision because you can't recruit someone from the private sector for such a short period." The main focus is on the Fed chair appointment, but he believes Miran will put more pressure on Powell to lower rates. MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN GLOBAL FOREX, NEW YORK: "I don't think it really matters much because people like me have more or less decided that the Federal Reserve is most likely going to cut rates in September and probably at least one more cut before the end of the year." "At the end of the day does it really influence our outlook for the Federal Reserve? I'd say probably not." "Is he qualified? I'd say, yes... he is an economic advisor to the President. He obviously understands the markets. Broadly speaking, we should welcome the view that the Federal Reserve is not going to be picked from a very small inner circle of people."
Reuters
22-07-2025
- Business
- Reuters
The perks and penalties of waging economic war: podcast
Follow on Apple or Spotify. Listen on the Reuters app. Listen to the podcast Tariffs and sanctions have roiled markets, but states can spur new industries. In this episode of The Big View podcast Daleep Singh, former US deputy national security adviser and chief global economist at PGIM Fixed Income, explores the new world investors must navigate. Follow Peter Thal Larsen on Bluesky and LinkedIn. (The host is a Reuters Breakingviews columnist. The opinions expressed are his own.) FURTHER READING/LISTENING The Right Way to Wield America's EconomicPower – Foreign Affairs The US can beat China on critical minerals but not by copyingit – Financial Times How a syndicated loan can funnel cash to Ukraine – Breakingviews Why financial warfare could backfire on the US – The Big View The power and peril of American economic warfare – The Big View Visit the Thomson Reuters Privacy Statement for information on our privacy and data protection practices. You may also visit to opt-out of targeted advertising.
