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Home > Investments > Fixed Income

By Jenna Voigt | Published Aug 20, 2012

Holman: Greek austerity efforts will fall short

TwentyFour Asset Management’s Mark Holman has warned Greece will fall short of its agreed austerity targets as the country looks to trim €11.5bn in costs over the next two years.

Mr Holman, managing partner at the boutique fixed income investment house, said: “They’re definitely going to be behind the cuts they’ve agreed.”

Germany has staunchly opposed a new relief package to bail out the debt-laden peripheral eurozone government, but Mr Holman said he was unsure whether Germany would view an extension as a new package.

But he said “with no additional funds coming through, the country would have to find money themselves,” something he said would be difficult to do.

The comments come after a report in German newspaper Der Spiegel warning that the level of Greek debt could be as much as €14bn (£10.9bn).

However, Mr Holman said the issue of Greek debt was still a “sideshow” to the situation in Spain.

Spanish bonds began to breathe a sigh of relief as two year yields fell to their lowest level since May, to 3.3 per cent, while yields on Madrid’s 10-year paper dropped 27 basis points to 6.17 per cent, after reaching a high of 7.62 per cent on July 24.

Mr Holman predicted yields on Spanish bonds would continue to climb on the front in, and predicted a slight uptick on longer-dated paper.

But he said it was “unlikely” the rally would be a “one way ticket up” and pointed out there were several events in September which could derail the upswing.

The outcome of Moody’s review of Spain is due to be completed by September 12, in conjunction with a vote in the German constitutional court over the legaility of the European bailout mechanism and the Dutch elections.

Mr Holman added that the Greek issue “could easily flare up again if there is a standoff”.

But the manager said his firm continued to take a positive view of fixed income markets in light of comments from the European Central Bank (ECB) in recent weeks.

“We’ve been positive since Draghi made his shock and awe comments a few weeks ago,” he said.

“For now, these are good markets for fixed income. This is what August used to be like [before the crisis].”

Today, strategist predicted the FTSE would continue to surge, potentially breaking the 6,000 point barrier by the end of the year.

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