May 30, 2018 / 12:53 PM / 6 months ago

Italian bond yields at 3 percent do not compensate for risk: PIMCO

LONDON (Reuters) - Italy’s 10-year government bond yields currently do not adequately compensate investors for country risk, a senior official at the world’s biggest bond investor said on Wednesday.

PIMCO chief investment officer for fixed income Andrew Balls said that while the risk that Italy leaves the euro zone is low, the current yield on government bonds does not match the risk.

“At the moment the easy thing to say is that the compensation you get for risk is not very high,” Balls told reporters at a briefing in London.

“There is a high probability Italy remains in the euro zone, and there is a low risk of actual default, you need to make sure you have the required compensation. It’s not obvious to me that at 3 percent (yield) that is there.”

PIMCO is underweight Italy, Balls said.

Italy’s 10-year yield was trading at 2.95 percent on Wednesday IT10YT=RR.

Reporting by Abhinav Ramnarayan; Editing by Dhara Ranasinghe

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