Diego Megia, the Chief Investment Officer at hedge fund Taula Capital Management, is optimistic about the potential of EU bonds despite recent challenges facing the bloc’s joint-debt issuance programme, according to a report by Bloomberg.
Speaking at the Sohn London Investment Conference on Wednesday, Megia highlighted what he sees as a compelling investment opportunity in these securities.
“The bonds are undervalued compared to similarly rated sovereigns,” Megia stated, predicting that spreads could tighten by as much as 40 basis points if the bonds are reclassified into major sovereign bond indexes.
The EU has been actively lobbying index providers to classify its bonds as sovereign debt, a change that could significantly enhance its attractiveness to investors. While MSCI and ICE have declined to make the adjustment, Bloomberg Index Services Limited is currently reviewing the proposal.
Taula Capital Management launched earlier this year with $5bn in assets, including $3bn in backing from Millennium Management. The fund focuses on macro strategies, fixed-income relative value trades, and inflation-risk opportunities.
Megia, a former senior trader at Millennium, sees the EU bond market as poised for growth, especially if the securities gain broader acceptance among global sovereign bond investors. “This is an opportunity for investors,” he reiterated, underscoring his confidence in the bonds’ potential to deliver value.
