May 30, 2018 / 10:36 AM / a year ago

JPM AM sees "disconnect" between Italy's economy and high bond yields

LONDON, May 30 (Reuters) - There is a “disconnect” between Italy’s high bond yields and its economic fundamentals after the latest selloff, potentially offering investors a buying opportunity, one of the world’s biggest bond fund managers said on Wednesday.

Nick Gartside, global chief investment officer at JPMorgan Asset Management, told Reuters there was still an economic case for the eurozone’s third-largest economy despite concerns around its political situation.

“I think we have got this disconnect between Italian yields and the economics (of Italy) because of the politics,” Gartside said.

“Structurally if you look at Italy, it is in reasonable shape. So when you get a lot of this volatility it does throw up opportunities.”

Italy is searching for a last-minute exit from almost three months of political turmoil on Wednesday, with its biggest party looking to make a renewed attempt to form a coalition government with the right-wing League, a source said.

Italy’s 2-year and 10-year borrowing costs came off multi-year highs on Tuesday and were at 2.02 percent and 3.01 percent respectively.

Gartside who cut his Italian debt holdings to “neutral” just before the latest crisis erupted, said he was looking for opportunities to step back into the market, but added:

“The challenge is the timing, because the politics is difficult to read.” (Reporting by Abhinav Ramnarayan; editing by Sujata Rao)

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