LONDON (Reuters) - Investors should buy UK bank bonds and British government debt whatever the result of the country’s referendum next month on whether to leave the European Union, bond fund giant Pimco said on Tuesday.
The junior debt of Britain’s major banks offers an attractive yield of 8 percent or higher, and even if the country votes to leave the EU “we do not see a material risk of capital loss,” Mike Amey, managing director and portfolio manager at Pimco said in a note.
Amey also recommended buying five- to 10-year gilts. With inflation so low interest rates are unlikely to rise over the next year regardless of the vote, and will probably be cut to zero in the event of Brexit, he said.
“Through a combination of strategies like these, we think portfolios can be structured to potentially benefit in the event that the UK remains in the EU and hedged in the event it takes the alternate path,” Amey said.
Reporting by Jamie McGeever; Editing by Nigel Stephenson