Fixed Income  

More bond woes for sovereign debt funds

The manager of the M&G International Sovereign Bond Fund was holding 7 per cent in five-year and seven-year Italian government debt since July 2012, as it had been yielding between 6 per cent and 7 per cent.

However, the yields have tightened so much that yields are down at 2.7 per cent and he said there was “further potential for political noise and a eurozone peripheral sell-off”.

Adviser view:

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Brian Dennehy, director of Chislehurst-based Dennehy Weller, pointed to fears that bond investors are about to get crushed. He said: “Trading desks are telling us that demand for quality credit is still outstripping supply, while a liquidity squeeze is continuing to drive down the yield on quality credit, forcing prices up. This looks set to continue.”