March 14, 2018 / 11:32 AM / 7 months ago

Brexit the biggest short-term risk: BlackRock's Thiel

LONDON (Reuters) - Talks on Britain’s withdrawal of the European Union pose the biggest short-term risk to European financial markets, BlackRock’s deputy chief investment officer for fixed income Scott Thiel said on Wednesday.

Britain's and European Union flags are arranged at the EU Commission headquarters in Brussels, Belgium December 4, 2017. REUTERS/Yves Herman

Britain is in the middle of negotiations with the European Union to try to agree the terms of a transition deal to cover the period after it leaves the bloc.

“The two positions are very far apart from each other, so I am unsure about the political fix that it will take to get us into a transition period,” Thiel said, with reference to why he sees Brexit as a big near-term risk for markets.

Thiel is also underweight on Italian bonds and said the lack of a reaction in Italy’s bond market to inconclusive elections on March 4 were a concern.

“The reality is that there has been no volatility in Italian bonds... to me that doesn’t make sense,” he told reporters.

Talking about the withdrawal of monetary stimulus by major central banks, Thiel said that he did not think the withdrawal of stimulus in the euro area would be as smooth as it has been in the United States.

One reason for that, said Thiel, was because the European Central Bank’s asset purchase scheme has been much larger than that of the U.S. Federal Reserve.

The ECB last week dropped a pledge to increase bond buys if necessary but signaled a slow route out of its 2.55 trillion- euro ($3.16 trillion) asset-purchase scheme.

Reporting by Dhara Ranasinghe and Claire Milhench, Editing by Sujata Rao

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