Fixed Income  

It’s a tricky time for European bonds

This article is part of
Fixed Income Investing - January 2016

Ken Taubes, head of investment management US at Pioneer Investments, highlights the benefits of a European recovery.

“We’re now seeing significant improvement in balance sheets, with companies shrinking their balance sheets, banks raising capital and acting in a much more prudent way for bondholders. So I think there will be some additional opportunities in the financial sector, particularly the banks in Europe,” he says.

Nyree Stewart is features editor at Investment Adviser


Michael Della Vedova, manager of the T Rowe Price European High Yield Bond fund, says:

“We believe M&A synergies and credit improvements will continue to play out, and we maintain overweight allocations in cable operators and wireless communications to potentially benefit from this trend. We are also overweight the consumer sector. Consumers are the bright spot in the eurozone economy, with their demand for services driving the region’s recovery.

The automotive and energy and metal and mining sectors are underweight allocations. Automotives largely comprises higher-rated fallen angels and is one of the lowest-yielding sectors in the index.

Meanwhile, energy and metal and mining names continue to come under pressure from sharp declines in oil and commodity prices. We have been underweight the euro energy sector for almost two years now.”