510 billion U.S. dollars in Norway's sovereign wealth fund, the largest in the world's second, said that his bet that Europe will leave the debt crisis is paying off in the bond markets in the region promise to deliver a "strong" recovery.
"This year, you're actually getting further compensated for the risk is obviously there, so I prefer to say we are more comfortable than less comfortable than a year ago, Yngve Slyngstad, director of Norges Bank Management Investments that manages the fund, said yesterday in an interview on Television Francine Lacqua. "In the future, I think the European bond market will be strong and healthy."
The Government Pension Fund, which last year reduced its holdings of European bonds peripherals, revived his interest in government debt Greek, Spanish, Portuguese and Italian into the third quarter, betting on a rebound after bailout Greece in May. In late September, the Spanish debt bond fund was the seventh largest holding.
Ireland's decision last month that Europe is concerned resort to emergency funds revived Spain and Portugal may have difficulty financing their budget deficits. To prevent the spread of markets and calm, the European Central Bank President Jean-Claude Trichet said Dec. 2 that the bank will delay the withdrawal of emergency liquidity, buying more government bonds members peripheral euro area.
'Worrying'
Europe remains a "worrying" situation, said Dominique Strauss-Kahn, managing director of IMF, in a speech yesterday in Geneva. The effects of the global financial crisis "are far from over" and the future of Europe "is more uncertain than ever," he said.
The Washington-based lender is contributing to Ireland's 85 billion euros (113 billion) rescue package, agreed upon after seven months in Greece with 110 million euros in ransom.
"Politicians have been doing a good job in 2010 to tackle a very difficult situation," said Slyngstad. "So we're confident that the politicians will do the work necessary to stabilize the market."
The difference in yield, or spread, between the Spanish 10-year bonds and German bonds has dropped to around 228 basis points, or 2.28 percentage points from a record 283 basis points in late November while the spread between the 10-year bond Ireland and European benchmark fell to 500 basis points, from a record 668 basis points on November 30.
Government trade flows of debt show that there is some appetite for bonds issued by Ireland, Portugal and Italy, according to ING Groep NV.
Peripheral 'sting'
"We've seen some reasonable bites peripheral role of the Buyside" wrote Padhraic Garvey, head of debt strategy at ING in Amsterdam developed markets, in a note today.
"The margins are usually generous enough to offset that risk, so some of the PIIGS inclusion in a portfolio is probably prudent," said Everett Brown, European bond strategist at IDEAglobal in London, in an email response to questions sent.
"The short term is a different story," he said, referring to the bonds issued by Portugal, Ireland, Italy, Greece and Spain. I am skeptical of the recent calm, and wait for tensions to resume soon, at least in January, when trading picks and countries to resume the financing of the auction. "
Norway oil fund administered by the country's oil wealth for future generations, allowing you to take a perspective of long-term investment and take more risks, Finance Minister Sigbjoern Johnsen said in August.
'Huge interest'
Investment in Europe accounted for 60.4 percent of the portfolio of fixed income fund as of September, an increase of 59.6 percent in June. The fund held 1150000000000 crowns ($ 190 million dollars) in fixed income securities at the end of the third quarter.
"We have up to 100 million euros in the European bond market and therefore have a huge interest in the job market," said Slyngstad. "For us, it's more about the situation between sovereign debt and banks are going to be fine."
The fund, which got its injection of capital for the first time in 1996, has been taking more risks, as it expands globally, the addition of stocks in 1998, emerging markets in 2000 and this property years to strengthen profitability and safeguard the wealth of the world's seventh largest oil exporter.
This year asked the Norwegian Finance Ministry, which oversees the fund's investments, to allow it to move in infrastructure and private capital. The proposal was endorsed last month by Ministry Strategy Council, an independent consultant, who said the fund has to take on more risk to achieve a real return of 4 percent.
China, India
The annualized real return fund since 1998 is 2.85 percent. He missed 23 percent in 2008. Most of the losses were recovered the following year, the fund earned 5.4 percent in the first nine months of this year.
Slyngstad said the fund, which invests Norway's oil wealth beyond its borders to prevent overheating of the economy, expects to add more fixed income investments in China, the fastest in the world, growing major economies, and India to attract more "global growth."
Late last year, the fund of 381 million crowns held in fixed income assets in China, of which SEK 240 million were in China Government International Bond. fund's benchmark is limited to holding a 5 per cent in Asia-Pacific bonds, 60 percent in Europe and 35 percent in the Americas. At the end of the third quarter, held 5.5 percent of its portfolio of fixed income in Asia and Oceania.
"Sooner or Later"
The China's gross domestic product will expand about 10 percent this year and next, the Paris-based Organization for Economic Cooperation and Development said on 18 November. India's economy grow by 8 percent, the OECD estimates. World production will expand by 4.2 percent next year, forecasts of the organization.
"We have no foreign exchange exposure in the Chinese renminbi and Indian rupee, as it is not permissible for a bond investor to invest a significant amount," said Slyngstad. "Sooner or later, we believe this will change."
Only Abu Dhabi has a bigger wealth fund, according to the Sovereign Wealth Fund Institute in California.
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