M&G's Riddell: Why I have bought Italian government debt

ECB'S BAZOOKA HAS HIT THE TARGET

M&G's Mike Riddell says he has bought Italian government bonds following the launch of the ECB's 3-year long-term refinancing operation - but warns core government bonds now look vulnerable.

The ECB finally realised it had no choice and fired its bazooka in December. The impact has been huge. Two year Italian government bond yields have more than halved from the high of 7.5% seen at the end of November. Many hedge funds who were betting on Italian government bonds selling off have either changed views and taken profits or have been stopped out of their positions as the market has gone against them. Real money investors have been returning to the Eurozone sovereign bond market after a long absence. Just as Italian bank bond yields spiralled upwards with the Italian sovereign,...