“One crisis was enough,” said Juncker. “After the toughest management of the Greece crisis, we have to do everything to avoid a new Greece–this time an Italy–crisis.”
Related: Italy Troubles Keep Pressure on Euro ETFs
Italian bonds have faced mounting pressure the last few months since the anti-establishment coalition of the right-wing League and the 5-Star Movement took over office in June. Last year, Italy recorded a government debt equal to more than 130% of the country’s gross domestic product, but has struggled to keep its repayments under control.
“There’s been a lot of noise around Italy, but I think the key question to focus on is not the rounding around the budget numbers that they are predicting or forecasting, but more this perception of whether the relationship with Europe is cooperative or whether it is disruptive,” said George Saravelos, global co-head of FX research at Deutsche Bank.’
U.S. Investors opt for Short Duration
As volatility is on the rise in the U.S. stock market indexes, investors are wanting to reduce exposure to the capital markets and this may be manifesting itself in fixed-income products. Investors can get short duration exposure with ETFs like the SPDR Portfolio Short Term Corp Bd ETF (NYSEArca: SPSB), which seeks to provide investment results that correspond to the performance of the Bloomberg Barclays U.S. 1-3 Year Corporate Bond Index.
SPSB invests at least 80 percent of its total assets in securities designed to measure the performance of the short-termed U.S. corporate bond market. Ideally, shorter-term bond issues with maturities of three to four years are ideal to minimize duration exposure should the bull market enter a correction phase.
Another short-term bond ETF option is the iShares 1-3 Year Credit Bond ETF (NASDAQ: CSJ), which tracks the investment results of the Bloomberg Barclays U.S. 1-3 Year Credit Bond Index where 90 percent of its assets will be allocated towards a mix of investment-grade corporate debt and sovereign, supranational, local authority, and non-U.S. agency bonds that are U.S. dollar-denominated and have a remaining maturity of greater than one year and less than or equal to three years–this shorter duration is beneficial during recessionary environments.
“In fixed income, it was more of the same, with good buyers of ultra short duration products,” said Brian Gilman of ETF Sales & Trading at Virtu Financial.
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