Invesco Perpetual star managers Paul Causer and Paul Read recently bought into Spanish and Italian bonds after seeing yields escalate during the European sovereign debt crisis.
The duo, who run upwards of £10bn across a number of IP bond portfolios, added the bonds after spreads widened to "phenomenal" levels through the turmoil earlier in the year.
Spanish debt was trading at just 57bp over the benchmark bund yield at the beginning of 2010, but the spread widened to over 220bp during the crisis. The spread has since narrowed to about 180bp.
Causer says investor panic during the crisis forced many Governments on the continent to make a number of hard economic decisions, which have had a positive effect on markets.
"European governments have done things they would never have done previously, particularly Spain," Causer says.
"It has really addressed the problem with the Cajas and has started to talk about liberating the markets and controlling its fiscal debt. All of these are good things.
"A few months ago everybody was talking about Spain and the £90bn funding it has to do this year. There were many questioning just who would give it to them. Well, they have been raising billions in recent months."
Despite seeing risk assets suffer in June and July, Causer and Read continued to add risk to their portfolios.
"We were running a lot of credit risk through the weaker period and have not really changed. In fact, we just added to it," Causer adds.
"Probably the most consistent thing we did through the last few months is continuing to add to our bank exposure. We continue to see good value in this area of the market."
