Comments from Nick Gartside, International Chief Investment Officer for Global Fixed Income at J.P. Morgan Asset Management, on Greece and how it can fund its €14bn bond redemption.Well, everyone's a winner at the moment. Equities, corporate bonds, core government bonds and even peripheral government bonds all continue to go up in price. On one level it's not surprising. Economic data is ok, banks are flush with liquidity from the ECBs recent 3 yr Long Term Refinancing Operation (LTRO), and are about to get even more cash at the next 3yr LTRO due in a months time. So, what could upset the apple cart? In a word: Greece, and specifically concerns around how Greece can fund its €14bn bond redemption due on March 20th.
It's not so much the fact that Greece per se defaults, market pricing already reflects this, it's more the consequences and second round effects of a Greek default. Here we have more questions than answers: is there an effective firewall for other peripheral countries, especially Spain and Italy? Where is the money going to come from? Will Greece stay, or leave the Euro?
So far markets are looking a little like early 2008. A ‘big' event is expected at some point and until then markets feel tranquil. One difference is that policy makers are now much better prepared and already the financial system has much more liquidity.
How are we positioning portfolios? We continue to pick up well researched, attractively valued risk assets and are maintaining modestly long duration positions.
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