Fitch fixed income survey reveals bearish eurozone outlook
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A survey by Fitch Ratins has revealed most European fixed income managers believe the eurozone sovereign debt crisis will continue through 2012.
According to the quarterly survey, 48% of respondents representing $7.1 trillion (£4.5 trillion) of fixed income assets believe the crisis will continue “largely as is”.
Monica Insoll, managing director in Fitch’s credit market research group, says: “A quarter of investors are more pessimistic, expecting the situation to worsen, evenly balancing the 24% who think it will get better or be solved.”
Just 3% thought the crisis would be solved during 2012
Ed Parker, head of Europe Middle East & Africa sovereigns at Fitch, says: “The investor survey largely accords with Fitch’s view that the eurozone crisis will persist, be punctuated by episodes of severe financial volatility, and not be resolved without a broad-based economic recovery.”
According to Fitch, although European Central Bank’s long-term refinancing operation (LTRO) boosted confidence in banks the impact on sovereign debt was “more uncertain”.
Of the total number of respondents to the suvey, 37% said the central bank’s liquidity action in December was “the big bazooka” needed to reduce risk of liquidity crises.
Yet, 54% of the reposndents said there would only be limited take-up by banks for the purpose of buying sovereign debt
“Although the LTRO has eased near-term bank and sovereign funding pressures, it is not evident that banks are using it for large-scale purchases of sovereign debt outside their home countries, nor that it has removed the risk of self-fulfilling liquidity and solvency crises,” adds Parker.
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