Better alternatives to gilts, says Pimco’s Balls
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Pimco managing director for European investment Andrew Balls says pressure could mount on Sterling if the UK does not put together a plan to sort out its crippling finances.
Balls, the brother of high-ranking Labour minister Ed Balls, warns that the UK must “put it’s fiscal house in order” or risk unwanted pressure on the British pound.
He says: “At a time when markets are focused squarely on sovereign risk, there is a danger that a loss of confidence in the UK could lead to pressure on the British pound and in turn pressure on the Bank of England to tighten monetary policy in spite of weak growth.”
Pimco, the world’s largest fixed interest investor, recently warned that UK gilts were lying on “a bed of nitroglycerine” and said it would continue to trade light in UK bonds.
Balls says: “We have long-term concerns resulting from the extreme policy interventions and the subsequent unwinding of these measures, which could create inflation that is well above the target level over the secular horizon.
“So we are cautious on the UK owing to the end of quantitative easing, thus we are underweight gilts. There are better alternatives, including German bunds.”
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Readers' comments (1)
Danny Lovey | 13 Apr 2010 11:01 am
Andrew Balls is speaking sense and reality unlike his brother - Labour Minister Ed, who does talk a lot of ...s
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