NEW YORK--(Fran Rodilosso, fixed income portfolio manager at Market Vectors ETFs.)--Standard & Poor’s recently announced its decision to upgrade Greek sovereign debt by six notches, a significant move and further support for the rally in global credit markets that has been underway since the summer, according to
“But the country's absolute level of debt, even as projected out 10 years, is still frightening in my view.”
“Concerns about a 'Grexit' (possible Greek Exit from Eurozone), which flared up in May, interfered with the credit rally that had been under way since Q4 2011,” said Rodilosso. “Since then, U.S. elections, the fiscal cliff, and concerns over China's slowing growth and its change in leadership have also been issues that weighed on market sentiment. But Greece, as insignificant as it might be as a standalone economy, has remained a potent symbol of the Eurozone's failures and its potential for unraveling, and held an outsized role as a significant driver of global sentiment.”
“As for S&P’s upgrade, it makes sense to me since it is based on the depth of support on display from Greece's neighbors,” added Rodilosso. “But the country's absolute level of debt, even as projected out 10 years, is still frightening in my view.”
“While we do not focus on the Greek sovereign paper in any of our ETFs, we have still noted that there may be opportunities to be found among corporate bonds,” he continued. “OTE (Hellenic Telecom), which we own in our passive Market Vectors International High Yield Bond ETF (IHY), is one such issuance. The OTE story was arguably a compelling one even in a ‘Grexit’ scenario as it has disclosed significant and profitable assets outside Greece, loans from Greek banks that might be ‘drachma-ized’ in an exit scenario, a relatively strong foreign shareholder base, and a domestic business unit that has held up well. OTE's 2014 bonds have recovered in price by approximately 65 percent since May, when they traded at 60 cents on the dollar.”
“Even amid a potential sovereign disaster, there are often some very good companies whose debt might have better recovery value than sovereigns in a worst case scenario and which also might be had at bargain prices when the news is most grim,” added Rodilosso.
Mr. Rodilosso has 20 years of experience trading and managing risk in fixed income investment strategies, including 17 years covering emerging markets. Among the Market Vectors ETFs under his watch are Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), International High Yield Bond ETF (NYSE Arca: IHY), Renminbi Bond ETF (NYSE Arca: CHLC) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR). As of November 30, 2012, the total assets for these ETFs amounted to approximately $1.4 billion.
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Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. This not a recommendation to buy or sell any security nor is it intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totals $27.9 billion in assets under management, making it the fifth largest ETP family in the U.S. and eighth largest worldwide as of September 30, 2012.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and manages approximately $37.8 billion in investor assets as of September 30, 2012.
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