Not even the calamity of disease, debt and Italy's fiscal woes are enough to stop the world's biggest money managers from a trade that's at the heart of Europe.
Investors at Pacific Investment Management Co., Axa Investment Managers and AllianceBernstein are counting on bond prices climbing in Europe's weakest countries, even with yields already hovering near all-time lows. In Italy, Europe's first epicenter of the crisis, bonds have rallied to pre-lockdown levels and the 10-year rate is now a paltry 1%.
But that may be enough. For investors that are having to scrape the barrel for returns, there are good reasons to buy European assets. Political leaders have backed an enormous amount of stimulus for the region and against a landscape of about $16 trillion of bonds with negative yields, some interest is better than none at all.
"You have the confidence of a monetary anchor that shields sovereign balance sheets," said Nicola Mai, who leads PIMCO's sovereign credit research in Europe. The asset manager, which oversees $1.8 trillion, has a "modest" overweight position in Italian and Spanish debt.