LONDON (Reuters) - French asset manager Carmignac said on Tuesday it had taken some short positions on shares in U.S. banks, citing the flattening U.S. Treasury bond yield curve among the reasons.
The fund’s chief investment officer Didier Saint-Georges said there could be a benign outcome to the trade wars launched by U.S. President Donald Trump but warned of other complex risks facing financial markets.
These risks consist of “a possible three-way collision: destabilising economic policies, a cyclical economic slowdown and central banks with little room left for intervention – all at the same time,” he said.
“In order to mitigate portfolio risk, we have put in place a certain number of short positions, particularly on U.S. bank stocks, which have been hurt by a flattening yield curve and shaky macroeconomic indicators,” Saint-Georges told clients.
The gap between U.S. 2- and 10-year bond yields has narrowed to less than 30 basis points, the tightest in 11 years. This is a negative for banks which need higher long-dated yields in order to lend to the economy.
Carmignac has also taken profits on some expensive-valued tech shares, Saint-George added.
Reporting by Sujata Rao; editing by Mike Dolan