(Bloomberg) — The US’s decision to sell euros to support Japan’s currency without warning European policymakers is adding to geopolitical risks and further dimming the appeal of longer-maturity government bonds, according to BlackRock Inc.
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While the yen intervention is unlikely to hurt European government bonds directly, the surprise maneuver shows countries are becoming “a little less cooperative,” according to James Turner, head of global fixed income, EMEA at the US asset manager.
“We are very reluctant to take longer duration at the moment because it is a volatile area of the sovereign curve,” Turner said. “We don’t really want the term premium risk because of the continued issues we see in geopolitical risk and also uncertainty at the long end.”
Longer-dated government bonds have been sliding on growing concerns about turbulent geopolitics, inflationary risks and excessive government borrowing, driving the yield on 30-year Treasuries to its highest level in nearly two decades last week.
The US blindsided the European Central Bank last week when it informed central bankers in Frankfurt that it had sold euros to buy the yen only after the intervention operation was completed, the Financial Times reported on Friday.
Story Link: BlackRock ‘Very Reluctant’ to Take Risks on Longer Dated Bonds
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