Kames Capital bond manager Stephen Snowden says he will not increase his underweight position in banks until the European Central Bank agrees to a round of quantitative easing.
Snowden has halved exposure to banks in his £242.5m investment-grade bond fund to 14 per cent in the last two months.
He says: “Look how unpopular bailing out the banks was in the UK. You can imagine how unpopular the German electorate feels about bailing out its continental cousins. The crisis has to get worse before it gets better.”
Snowden says the only realistic resolution is quantitative easing, adding a pan-European bond would not provide a solution and the EU lacks the ability to easily transfer funds between member states, as seen in the US.
Dennehy Weller & Co managing director Brian Dennehy says: “There is some buying going on but most bond managers are reducing their risk and high-yield exposure.”