Market Vectors’ Fran Rodilosso on Greek Upgrade and Corporate Bond Opportunities During Sovereign Troubles
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 Fran
Rodilosso, fixed income portfolio manager at Market Vectors ETFs.
“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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About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and
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September 30, 2012.
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