At the moment, it feels like the ECB has just put quite a few coins in the jukebox, everyone’s dancing and that is going to overwhelm any concerns about fundamentals for quite some time.”
Bezalel says this year, there is £250bn ($369bn) of planned issuance by governments in Europe, and around £600bn of bond buying from the European Central Bank (ECB).
“That’s quite an overwhelming amount of money about to enter the government bond market and try to find paper to buy.
“With all that money sloshing around and all of this hunt for yield, that bond buying is going to compress yields. It has compressed yields significantly already. I can’t see yields in this world moving higher, and therefore we have to play. We have to participate.”
He also points out that 175% debt to GDP is going to just keep sending Greece into recession and out of recession. “It’s just not sustainable, so something needs to be done to loosen up that noose around Greece’s neck.
“Yet, in terms of the whole European project, at the moment it feels like on the back of the depreciating euro, the lower fuel prices and a stimulus been imparted by the ECB, Europe can look good for a while yet.”
One of Bezalel’s immediate concerns is China, as a number of indicators suggest its economy has slowed down fairly sharply. “If anything, we’ve been increasing our Australian Government bond position of late,” he says.
“We’ve seen them implement another rate cut over the weekend, having done one not too long ago. You’re going to see more and more rate cuts over the course of this year. China’s debt levels are definitely troublesome.
