Winship: Mervyn King will do ‘whatever it takes’

Mr Winship, head of sterling fixed income and manager of the BlackRock Absolute Return Bond fund, said global central banks had performed particularly well during the eurozone crisis, even as politicians erred in their responses.

“You can’t rely on politicians but I do believe in central banks,” Mr Winship told the Alpha Generators 2012 conference in London on February 8.

The conference took place shortly before the Bank announced it was expanding its quantitative easing (QE) programme by a further £50bn, as it continued to fight deflationary pressures in the economy.

“The Bank of England will keep on doing quantitative easing – QE2, QE3, QE4, and whatever it takes to return to growth,” he said.

He added that the US Federal Reserve had a “strong start” to 2012 when its Federal Open Market Committee, which sets interest rates, announced that the current US interest rate of 0.25 per cent was set to remain “at least through late 2014”.

Mr Winship also praised the actions of ECB president Mario Draghi since he took over from Jean-Claude Trichet in November. The biggest of these was the €489.2bn (£408.5bn) long-term refinancing operation (LTRO) launched in December to ease pressure on banking finance. A second round is expected on February 29.

The manager said: “If it wasn’t for the European Central Bank (ECB) doing LTRO then some parts of the fixed income market wouldn’t have got to Christmas. Large areas of it had stopped working.”

He added that the actions of central banks had made him more positive on the outlook for the bond markets. Gilt yields of 2 per cent were “pricing in too much failure”, he said, and focusing too much on Europe without taking into account more positive data from the US, falling interest rates in Asia and relatively strong global growth outside of Europe.

“We’ll have to move to deflation to see yields go down from 2 per cent to 1 per cent, and no one is forecasting that,” he said. “At the very least yields will flatline, and will probably go higher from here.”

Mr Winship said he was adding risk to the Absolute Return Bond fund by increasing exposure to emerging markets, credit and high-yield bonds.

Since the fund’s launch on September 30 to February 7, it has gained 0.9 per cent according to Morningstar. It invests across all areas of the government, corporate, high yield and currency markets and targets a positive return above cash over any rolling 12-month period.