Despite the market turmoil surrounding the banks' situation, there is no room for central banks to let up in their fight against inflation. This is what Franck Dixmier, Head of Fixed Income at Allianz Global Investors, told F.A.Z. The main task for the US Federal Reserve (Fed) is now to prevent contagion risks through Silicon Valley Bank (SVB) to other banks, especially the regionally oriented US institutions. Dixmier sees the announcement of the loan program as an important signal because it amounts to an implicit guarantee for the regional banks.
Editor in business.
- Follow I follow
Compared to the situation before the 2008 financial crisis, he believes that the big banks are now much more resilient. They had high capital and liquidity buffers. For the bond expert, the Fed and the European Central Bank (ECB) are still far from controlling inflation. "In order to remain credible, they cannot stop the rate hikes now." The ECB Governing Council will meet this Thursday and, despite the recent turbulence in the banking sector, is likely to stick to its already announced increase in the deposit rate by half a percentage point to 3.0 percent.
Dixmier considers it remarkable that the ECB was able to keep inflation expectations on the market at a level of 2.5 percent despite the significantly higher price increase. "But market expectations can quickly shoot up if the ECB deviates from its tightening course," he warns.
He sees the turnaround in interest rates as a very healthy development. In times of negative interest rates, there had been price distortions that had made it difficult to assess further developments. This has now changed. Should the ECB ever reach the end of the rate-hiking cycle, that would be the time for Dixmier to invest again in long-term bonds. Currently, the market sees the end of the ECB's interest-rate hike cycle at around 4.5 percent.
In the bond market, he depends on the active selection of risks. In a passive index fund (ETF), the investor invests in the full universe and thus also in bad risks. "Our goal as active fund managers is to win by avoiding the bad risks," he stresses. Dixmier refers to the advanced fixed income products of his fund company, which have always performed better than the respective index. He also doubts that bond ETF products are tradable on the market at any time.