“Too late to hedge risk in bond markets”
Ville Talasmaki, managing the financing investments of the Finnish financial group Sampo Oyj, said it is too late to hedge the risk in the bond markets.
“If you didn’t start hedging against the risk of a sharp selling wave in the credit markets last month, don’t bother anymore.”
Ville Talasmaki, who is in the management of Finnish financial group Sampo Oyj’s $ 16 billion bond investments, says the warning signs have been around for a while.
“There is not much you can do now to hedge yourself against the crisis. All wise decisions should have been made when warning signals came in February and before,” Talasmaki said.
Talasmaki underlined that the markets are no longer functioning reasonably with the panic that settles as the effects of the coronavirus spread, “As a result, good value corporate bonds are subject to sale without discrimination.” said.
Commenting on the high-interest bonds and leveraged loans, which are the risky side of the bond market, Talasmaki said, “Brutally; in general, there is a situation like throwing out the baby with the bathwater” said.
However, there are signals that the perception has improved with the announcement of the historical stimulus packages of the European Central Bank (ECB) and Fed. Especially for high-grade bonds, panic has decreased.
“As long as the ECB’s liquidity support is credible, this is unlikely to turn into a full-scale risk or a disaster for Europe,” Talasmaki said. He emphasized that the next step as an investor is to be ready to take when the recovery begins.
“History taught us that the first investments made after the crisis were the best,” Talasmaki said.