March 14 (Reuters) - Legal and General Investment
Management (LGIM) is reducing its exposure to government bonds,
taking profits after Silicon Valley Bank's collapse spurred the
biggest debt rally in decades, its head of rates and inflation
strategy said on Tuesday.
"We've been reducing some of the rates exposure over the
course of the last couple of days as the pricing has moved,
leaning against the wind rather than with the wind," Chris
Jeffery, a member of the $1.6 trillion investor's asset
allocation team, told Reuters.
Prior to the SVB turmoil, the firm had been tactically
overweight interest rate risk, Jeffery said.
Jeffery added that financial stability concerns raised by
SVB did not change his expectations of another 100 basis points
worth of rate hikes by the European Central Bank and another 50
bps by the U.S. Federal Reserve. But he now expected them to
hike at a slower pace.
"We have not participated in that complete change of view on
the Fed," he said.
"The inflation imperative is the most important one and that
prevents the kind of rapid pivot that the front end is looking
for," he added, referring to shorter-dated bonds that led the
post-SVB rally.
Jeffery said LGIM was also looking at whether it wants to
move to underweight positions, essentially betting against
certain parts of the bond market.
"The U.S. front-end is one of most interesting places to be
thinking about that given just how much it's moved now," Jeffery
said.
(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe)
Messaging: yoruk.bahceli@thomsonreuters.com))
