In a blog published on the firm’s closely watched Bond Vigilantes feed this morning, fund manager Maria Municchi said deflation risks appeared to have fallen and GDP trends were improving.
But yet yields were rising distinctly from other markets in certain long-term eurozone debt markets.
Municchi said rising long-term yields in Portugal and Spain might be partly explained by the nations’ rising debts amid the euro crisis, but debt levels have “plateaued” since 2013.
In fact the situation in the eurozone is much improved compared to 2012 and yield movements in some markets could represent a price opportunity, she said.
“An investor’s job is to assess whether price moves reflect genuine changes in these characteristics or simply shifts in investor perceptions of them,” Municchi said.
“Are we simply overweighting the risk of default of those countries just because we have experienced the Euro crisis? Is the emotional trait of availability bias distorting our thinking and decision making?”
She said that recent polls in Europe had suggested the continent’s peoples may in fact be more inclined to save the euro currency than recent populist votes suggested.
“We cannot know who will win the next elections or what Brexit will actually mean for Europe but we can know if we are being appropriately compensated for the risks we are taking,” the manager said.
