Bond bosses back Congress to avoid cliff

Michael Bow
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EUROPEAN bond managers have backed US politicians to avert the country’s $600bn (£375bn) fiscal cliff before the turn of next year, after a survey from rating agency Fitch revealed 82 per cent of bond fund executives said they were confident a deal would be struck.

The Fitch study, which polled 97 high level bond fund managers and credit researchers mostly from the top 50 asset managers in Europe, found just five per cent feared the cliff would trigger a recession. The majority, 82 per cent, said it would ultimately be avoided but was hitting investor confidence. Ten per cent said it was having no impact.

Forecasters have been mulling the likelihood of the US failing to agree a deal on $600bn of tax cuts and spending rises due to hit in January 2013 since Federal Reserve chairman Ben Bernanke coined the term on 29 February during a Congressional hearing, with heavyweight strategists such as BlackRock’s Russ Koesterich claiming markets are failing to price in the risk of a cliff.

Further data out yesterday from State Street Global Markets showed confidence among North American institutional investors at a record low on fears of the cliff, as they scurried away from US equities sending the survey’s confidence barometer down six points.