Diversification of portfolios by Irish investment managers has been picked up by the European Central Bank. The ECB commented that the disappearance of currency risk across the euro area has allowed investors to increase diversification. ‘Investors in smaller countries seem to have diversified more quickly than in larger ones’, the ECB pointed out.
Although government bond spreads between euro states had narrowed, ‘Liquidity has become a major factor in defining investors’ preferences for eurozone government bonds’.
Nonetheless, there were still barriers to further integration of bond markets, the ECB said.
‘Sufficiently harmonised regulation of property rights (of particular relevance for the lower-rated bonds segment), harmonisation of accounting rules and corporate governance systems, appropriate regulation of deposit and settlement issues, and appropriate harmonisation of the regulations and of the legal documentation affecting the repo market, are all needed.’
‘Furthermore, unlike banking regulation where there is a fairly standardised set of rules, securities regulation is far from providing a common competitive framework.’ |
