Bloomberg News

BlackRock’s Rieder Comfortable Holding Italian Debt Amid Crisis

November 16, 2011

Nov. 9 (Bloomberg) -- BlackRock Inc., the world’s biggest money manager, said it’s “comfortable” holding intermediate Italian bonds as a surge in yields triggers concern the collapse of the government will force the nation to seek a bailout.

“Our view has been that a solution to stabilize European sovereign and financial markets is very far from conclusion, and thus, maintaining very nominal exposures to some of the countries with substantial refinancing needs was the right portfolio posture,” BlackRock Chief Investment Officer Rick Rieder said in an e-mailed statement to Bloomberg News.

Prime Minister Silvio Berlusconi’s offer to resign has left Italy struggling to produce a new regime stable enough to implement austerity measures. Yields on two-, five- and 10-year Italian bonds rose above the 7 percent today, euro-era highs and the level that drove Greece, Ireland and Portugal to seek international bailouts.

On Oct. 13, Rieder said on Bloomberg Television’s “Inside Track” with Erik Schatzker that BlackRock was buying Italian debt given improved prospects for a resolution to the euro zone sovereign debt crisis. Italian 10-year notes, which finished today at 7.25 percent, traded at 5.82 percent on Oct. 13.

“The ultimate outcome we think is going to be constructive,” as far as European policy makers’ efforts to contain the crisis, Rieder in the Oct. 13 interview.

‘More Comfortable’

“We have become more comfortable with the levels of some of the debt, like some intermediate Italian bonds,” Rieder said in the statement today. “These levels will foster a greater sense of urgency towards an ultimate European solution. However, we still maintain a very conservative posture here and see a number of hurdles which still have to be cleared before growing positions.”

Italian bond yields surged today after a clearing firm increased the deposits it demands for trading the nation’s securities, intensifying the European credit crisis. LCH Clearnet SA, a clearing house that guarantees investors’ trades are completed, demanded higher deposits for Italian debt.

In a separate Bloomberg television interview on Oct. 21, Rieder said BlackRock remained a buyer of Italian government debt as European policy makers were set to gather to address the region’s sovereign debt crisis. “Italy is attractive,” Rieder said during an interview on “InBusiness With Margaret Brennan” on Bloomberg Television that day. Euro finance ministers meet on Oct. 21, followed by ministers from all 27 European Union countries the following day.

“We are encouraged that policy makers appear to be meeting and addressing the challenges implicit in some of the recent proposals, and think these debt levels require policy movement and decision-making,” Rieder said in the statement today. “We are optimistic that this will happen over time, but still think that markets will be stressed until that time comes, and thus are maintaining a very conservative posture.”

--Editors: Dave Liedtka, Greg Storey

To contact the reporter on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net


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