Willerbond European Currencies

Lugano, 16/04/2013

During the course of the 2012 the sovereign debt aspect of the Euro crisis has not been resolved. Surprise has come from the monetary policy, while from the fiscal policy point of view, in the periphery most of the troubled countries have carried out painful fiscal adjustments that have depressed growth. Policymakersmove on in uncharted territories. Nevertheless investors are not to forget sound economic and fundamental principles. Risk-free government bonds may be overvalued if not in a bubble, but, once again, when their “safe-heaven status” is reaffirmed by the escalating crisis, thebubble does not burst. The case for a bubble could be more compelling in the future alsofor investment grade and high yield credits, where everyone is chasingyield right to escape from financial repression and investment decisions tend to be distorted by unconventional monetary policies. However we think that there are still some appealing places to pick up yield in the Euro fixed income markets. High yield bonds have led and continue to lead the way as year to date performance among different bond markets segment clearly demonstrate.

On the other end, the new “bail-in” paradigm requires to reassess the situation of financial bonds that now are more likely to be trapped in any eventual restructuring process.

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