Managers eye Italian bonds as 'investors are too bearish'

'Italexit risks are overstated'

Fixed income managers are split on whether value can be found in the Italian bond market as political uncertainty in the country continues to weigh on investor sentiment.

The spread between Italian bonds and German bunds widened materially at the end of 2018, with markets pricing in an elevated risk for an 'Italexit' following the installation of a populist government comprising Lega Nord and the Five Star Movement. As spreads moved more than 300 basis points, a 30% likelihood of Italy leaving the European Union on a two-to-three-year view was also priced in, according to Mark Dowding, co-head of developed markets at BlueBay Asset Management. However, Dowding, who has increased the exposure to Italian bonds in the firm's €107m High Yield Corporate Bond...