BlackRock Responds To Zero Hedge Query On Its Italian Debt Exposure

Tyler Durden's picture

Earlier we asked some simple questions regarding BlackRock's sovereign debt exposure. Multi-trillion asset manager BlackRock responds:

  • BLACKROCK RESPONDS TO QUESTIONS ON ITALIAN DEBT HOLDINGS
  • BLACKROCK COMFORTABLE WITH INTERMEDIATE ITALIAN BONDS
  • BLACKROCK ENCOURAGED POLICY MAKERS ADDRESSING CHALLENGES
  • BLACKROCK CHIEF INVESTMENT OFFICER RIEDER COMMENTS IN A NOTE

Hopefully this response will satisfy the market and make it comfortable with BlackRock as an intermediate-term going concern. Then again clarifications such as this one by other Blackrock professionals, namely that the market is wrong, probably will not help:

  • BLACKROCK'S ROVELLI: ITALY SPREADS DON'T REFLECT FUNDAMENTALS

So, what happens if the spreads do reflect fundamentals? Will Blackrock apply Mark to Market to its Italian holdings? And perhaps BLK can follow in Jefferies' footsteps and be so kind to break down it gross and net exposure for all to see? After all, there is nothing to hide among its "nominal exposures."

More from Bloomberg:

BlackRock Inc., the world’s biggest money manager, said it’s “comfortable” holding intermediate Italian bonds as a surge in yields triggers concern the collapse of the government will force the nation to seek a bailout.

 

“Our view has been that a solution to stabilize European sovereign and financial markets is very far from conclusion, and thus, maintaining very nominal exposures to some of the countries with substantial refinancing needs was the right portfolio posture,” BlackRock Chief Investment Officer Rick Rieder said in an e-mailed statement to Bloomberg News.

 

On Oct. 13, Rieder said on Bloomberg Television’s “Inside Track” with Erik Schatzker that BlackRock was buying Italian debt given improved prospects for a resolution to the euro zone sovereign debt crisis. Italian 10-year notes, which finished today at 7.25 percent, traded at 5.82 percent on Oct. 13.

 

"The ultimate outcome we think is going to be constructive,” as far as European policy makers’ efforts to contain the crisis, Rieder in the Oct. 13 interview.

 

“We have become more comfortable with the levels of some of the debt, like some intermediate Italian bonds,” Rieder said in the statement today. “These levels will foster a greater sense of urgency towards an ultimate European solution. However, we still maintain a very conservative posture here and see a number of hurdles which still have to be cleared before growing positions.”

 

In a separate Bloomberg television interview on Oct. 21, Rieder said BlackRock remained a buyer of Italian government debt as European policy makers were set to gather to address the region’s sovereign debt crisis. “Italy is attractive,” Rieder said during an interview on “InBusiness With Margaret Brennan” on Bloomberg Television that day. Euro finance ministers meet on Oct. 21, followed by ministers from all 27 European Union countries the following day.

 

We are encouraged that policy makers appear to be meeting and addressing the challenges implicit in some of the recent proposals, and think these debt levels require policy movement and decision-making,” Rieder said in the statement today. “We are optimistic that this will happen over time, but still think that markets will be stressed until that time comes, and thus are maintaining a very conservative posture.”

In other words, BlackRock is betting, hopefully not the house, that Italy is Too Big To Fail and someone else will not make a case study that could cost the company billions. Surely to former Lehmanite (and former vice chairman of the all important TBAC) Rick Rieder, this is prudent risk management. Unfortunately, it did not quite work out for the Norwegian sovereign wealth fund's foray into Greek "hold to infinity" investing.