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Eurozone crises could trigger fall in government bond yields

BlackRock’s Ian Winship has warned the ongoing sovereign debt crisis in Europe could trigger further falls in government bond yields.

By Jenna Voigt | Published Apr 27, 2012 | comments

Mr Winship, manager of the £34.3m BlackRock Absolute Return Bond fund, said yields of 2 per cent can “easily” become 1 per cent – and “once you get there you’re stuck”.

But the manager said he expected the yields to “at some point start to rise” again.

Overall, Mr Winship said the global economy was starting to look more positive, as “momentum is still building” in the US and central banks are poised to take necessary measures to boost economic growth.

If economic data continued to pick up, he said the US Federal Reserve would look to raise rates at the end of 2013, while the Bank of England would likely turn to another round of quantitative easing if UK figures were subdued.

“All the central banks are now in a line. You can see what they’re all trying to do together,” said Mr Winship.

He added that as long as the economies of the US and Asia continued to fare well, “that buys a bit of time for Europe”.

The manager is short US treasuries and German bunds and said he is looking to short Canadian government bonds. He added he was avoiding Europe in general due to volatility in the region.

However, Mr Winship said: “We can afford to stay out for another quarter, but if Europe can get through the austerity plans, the second half of this year will be fine and we’ll have to invest.”

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