Geneva-based Sumus Capital partner and CIO Andrea Zuccheri has told Citywire Switzerland that Italy’s government bonds are too risky.
Zuccheri said: ‘We are not taking the risk because the situation is still too unclear and the possibility of a Eurosceptic government is still too high.’
After Italy’s president Sergio Mattarella refused Paolo Savona as finance minister, Giuseppe Conte gave up his mandate to form a new government.
Zuccheri said that the refusal was in part a positive sign, as it shows Mattarella does not agree with an extreme position. However, the prospect of a new government is much lower now.
He said: ‘The most likely scenario is that Italy will go back to the polls in September. We will have to see what happens then.
‘If a centre-right government will be formed without the Five Star Movement (M5S), we will consider to increase our exposure to Italian bonds.’
The CIO warns investors about the Italian corporate bonds too, especially in case of domestic companies being closely linked to the government.
Zuccheri however said the spread between Italian bonds and German equivalents reaching their highest peak since 2013 has not yet impacted his investment strategy. He will start modifying it once the BTP yield reaches 3%.
Meanwhile the CIO is looking at Spanish corporate bonds, saying: ‘Even though Spain is also facing a political crisis, there are no risks of Eurosceptic governments and aggressive fiscal policies.’