Pioneer Investments, which manages E7 billion in European corporate credit in Dublin, is buying short- and long-dated telecom paper to put on a so-called barbell trade. Raffaele Bertoni, head of fixed income for Europe, says he is going to buy telecom bonds with maturities of three-years and under and 10-years and over. He likes France Telecom, Olivetti Telecom Italia and Deutsche Telekom.
He says he expects to see continued over performance of the short end of the curve because of further interest rate tightening from the European Central Bank, making the carry received on the short telecom bonds very attractive. On the long end of the curve, Bertoni thinks the huge demand from long-dated bonds from investors looking to increase duration of portfolio will help spreads come in.
Bertoni also likes subordinated bank debt and has been buying tier one, lower tier two and upper tier two paper from Royal Bank of Scotland, BNP Paribas, IMI San Paolo, Banco Espirito Santo and Banco Comercial Portugues. Pioneer is underweight cyclicals and utilities. Pioneer uses the Merrill Lynch Broad European Corporate index as its corporate bond benchmark.
