March 11, 2020 / 11:43 AM / 23 days ago

Allianz GI's Riddell buys back into Italian debt, likes UK bonds after BoE cut

LONDON (Reuters) - Allianz Global Investors has bought back into Italian government debt after a huge coronavirus-induced selloff, and is eyeing longer-dated UK gilts after the Bank of England cut interest rates, head of UK fixed income Mike Riddell said on Wednesday.

“We are overweight Italy because they have cheapened a lot and because we think the ECB will act on QE (quantitative easing) and buy more Italian government bonds,” the London-based fund manager told Reuters.

Riddell also said that following the BoE’s surprise 50 basis point reduction on Wednesday to rates to 0.25%, the bank was closer to restarting quantitative easing than many have anticipated.

“The front end of the gilt market cannot rally much more from where it is right now, but that doesn’t mean gilts overall can’t rally,” he said. “The rate cut was not a surprise to the market, but what this means is that QE is far closer than the market anticipated just a few days ago.”

Riddell said that liquidity - the ease with which investors can buy and sell without moving the price - had deteriorated on Monday, and his fund found it difficult to buy Italian government bonds.

(This story adds missing letters in headline)

Reporting by Dhara Ranasinghe; Editing by Tommy Reggiori Wilkes

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