“If you are buying Italy you’ve got to think about other choices you’ve got around,” he said. “What other markets can you go to where you get similar yields but without the volatility. There are still opportunities out there.”
While the probability of Italy leaving the euro remains low, investors would now look for sufficient compensation for such risk and the country’s bonds don’t offer that yet, according to Andrew Balls, chief investment officer of global fixed income at Pimco.
‘There are rude-awakening risks in terms of populism in the euro zone and potential for markets to price in much more risk premia,” he said. “We’re not forecasting any sort of Italy exit but you do not need a high risk of this to happen in order to want much more risk premium.”
This article was provided by Bloomberg News.