SWITZERLAND – The €15bn Swiss Federal Social Security Fund AVS is looking at investing in euro-denominated bonds following a possible cut-back in its investment in US bonds and dollar-denominated debt.
Fund managing director Eric Breval told IPE that this possible reduction could take place towards the end of this year or beginning of next year.
The move away from US bonds has been prompted by increasingly serious financial and economic problems experienced by the US economy and government. These include rising government debt and higher interest rates.
However, Breval stressed that this was not a recent development, and concerns were not new. “But the time is coming when we will act,” he said.
Currently the fund has approximately €2bn invested in US bonds. Breval could not state by how much its investment might be trimmed by.
“A considerable portion will go into euro bonds,” he said. There is still uncertainty as to where the rest will go, and a decision date has not yet been set.
A report earlier this week stated that climbing interest rates may result in homeowners defaulting on loans, and affect mortgage finance company giants Fannie Mae and Freddie Mac - which own or guarantee almost half the €6.5trn mortgage market.
The US Congress, in turn, has mounting concerns that the companies’ debt might be too great, thereby posing risks for the economy.