Breaking News, World News and Taiwan News.

Updated Saturday, March 13, 2010 12:47 am TWN, By Paul Dobson and Lukanyo Mnyanda, Bloomberg

Sponsors
▪	Find great real time deals on China Flights. Book flights to China or China domestic flights 24/7.
▪	Buy china wholesale products from reliable chinese wholesalers on DHgate.com!
▪	Save 75% for all hotels in Shanghai, Beijing and whole China. Lowest rates for Flights in China.
▪	Get the best deals for Guangzhou Hotels or choose from more than 10,000 hotels in 499 Chinese cities.

Investors should avoid Spain bonds, says Merrill

Investors should avoid Spain's bonds as the euro region's highest levels of joblessness stifle the country's ability to cut its budget deficit, according to Invesco Ltd. and Bank of America Corp.'s Merrill Lynch unit. Spanish debt isn't yielding enough to compensate investors for buying the bonds of a country with the euro region's third- largest budget deficit, according to Axel Blase, a fund manager in Frankfurt at Invesco. Investors receive a 69 basis-point yield premium for holding Spanish 10-year bonds rather than German bunds, compared with 313 basis points for Greek debt.

“It's not a time to increase exposure to Spain,” said Blase, who helps oversee the company's US$423 billion in assets. “The country is in rather serious difficulties and the risk premium on Spanish bonds isn't that attractive.”

Concern that Europe's most recession-battered nations aren't doing enough to contain their deficits sent Greek bond yields to the highest in more than a decade, and helped push the euro 4.6 percent lower against the dollar this year. While attention focused initially on Greece, Spain may take years to recover from the recession, according to Johan Jooste, a strategist at Merrill Lynch Wealth Management in London.

“It's going to take a very long time -- half a generation -- for them to fix the structural issues they have,” Jooste said. “Rather than a spectacular short-term blow up, a more likely outcome is a death-by-a-thousand-cuts-type scenario.”

The country's economy, which is more than four times the size of Greece, has been contracting since the second quarter of 2008. The deficit reached 11.4 percent last year, almost four times the EU's 3 percent limit, compared with 12.7 percent for Greece.

Standard & Poor's said Feb. 26 the Spanish government's growth forecasts may be too optimistic, predicting average gross domestic product expansion of 0.6 percent through 2013, compared with the 1.5 percent upon which lawmakers are basing budget measures. The public debt burden will rise above 80 percent of GDP by 2012, compared with 40 percent in 2008, S&P said.

Subscribe to The China Post and save 25%. Click here

Comments

November 23, 2010 letters@

'avoid all bonds' . . .
J R, in Thailand says buy farms and precious metals.