LGT's Ewald Dür is considering buying Spanish debt having told Citywire Global previously that he had only expected to buy peripheral debt again when denominated in local currency.
The Citywire AAA-rated manager has been a vocal sceptic of the ECB bond-buying programme and, until now, has maintained a bearish portfolio that includes over a quarter of Dutch debt as the fund's largest single holding. Dür hasn't held any Spanish or Italian debt since April 2011.
'We are considering buying in Spain,' he told Citywire Global. 'The big question now is that if you do have a back-stop for Spanish and Italian debt- by this we mean mainly Germany - then our exposure to the Netherlands looks very expensive.'
Yields on Spanish 10-year government bonds fell to their lowest on Thursday since March 2012 following a successful debt auction.
'The debt is starting to look a bit expensive and we've obviously late getting in. It's extreme how much liquidity there is in the market at the moment and Spain is where everyone is rushing in.'
Dür, who manages the LGT Bond Fund Global, has the capacity to invest in corporate debt. Yet current allocation to companies is at less than 5%.
'We're in an environment where Spanish and Italian debt are the only option with zero yield in the rest of the market. Corporates we see trading too tight to government debt to be attractive.'
Dür added that he doesn't forsee a rate hike by the European or US central bank this year and as such as kept duration just longer than benchmark.
At its monthly meeting in Frankfurt yesterday, the ECB left rates unchanged and in line with expectations at 0.75%.
The LGT Bond Fund Global has returned 38.6% in the last three years. Its benchmark, the JP Morgan Global GBI Unhedged index, rose 25.8% in the same period.