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Market update 19 March: ECB launch bond-buying programme to combat market turmoil

  • Long-term interest rates rose everywhere, even in so-called safe havens. The US 10-year interest rate rose by 11 bps and the German equivalent by 20 bps with the latter now at a similar level to the beginning of the year, which is highly unusual in a period of distress.
  • This is a sign that investors need cash and are selling the most liquid assets in their portfolios to meet margin calls or redemptions. It could also be a signal that investors are starting to discount the higher Government debt as a result of the massive fiscal stimulus we have seen rolled out globally.
  • We saw extreme movements in FX markets with significant NOK depreciation to record lows of NOK 11.87 / USD.
  • The ECB held a second emergency meeting and launched a EUR 750 billion bond-buying program to try and restore market confidence and stability. The central bank will purchase government and corporate debt (including non-financial). This comes in addition to the existing QE program, and the ECB will now buy more than EUR 1 trillion in the next nine months. European bond markets are reacting positively to this.

SKAGEN Funds Summary

  • The portfolio managers continue to position the funds for any rebound, while protecting them against any further drawdown.
  • They are monitoring a lot of attractive stocks with strong balance sheets which have become cheap in the current bear market.

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