Barclays: Equities preferred over bonds in coming quarter; low yields part of 'relief rally'

By Andrea Heisinger

New York, March 22 - There is a preference for equities over bonds in the coming quarter, and any threat from the euro zone will not be debilitating to the market as it was during the credit crisis in Greece, analysts from Barclays said Thursday during their quarterly outlook to reporters in New York.

The market rally of the last few months is a relief rally, said Larry Kantor, managing director and head of research at Barclays.

"It was more a relief that a disaster was not occurring," he said, adding that yields on bonds were at record lows and was a sign of no growth.

"This rally has taken place with very low volume, and it shows lot participation," Kantor said.

Barclays views equity as more attractive than fixed income, Kantor said.

His colleague Michael Gavin, managing director and international macro strategist, said that Portugal is an important source of event risk for the remainder of 2012, but that there won't be any restructuring of the country's debt leading to a market destabilizing event.

"Greece was a one-off event, not a template," Gavin said.

He also contributed further to Kantor's comments that credit is not the place to invest at the moment, after the "vicious rally" of the last couple of months in bonds.

"Corporate credit does badly if things go really well, or really poorly," Gavin said. "It's hard to think of a situation when it would do well."

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