The majority of European fixed income investors are unconvinced by recent policy efforts to solve the eurozone crisis, according to Fitch Ratings’ quarterly investor survey.

Representing the views of managers of an estimated $5.6trn of fixed income assets, the survey found that 58 per cent of investors believe the eurozone fiscal compact is positive but marginal in solving the crisis. Only 25 per cent regard it as an important policy innovation bringing crisis resolution closer, while 17 per cent view it as an irrelevance.

Fitch believes the fiscal compact is an important step towards building confidence in fiscal discipline in the eurozone, but added that additional measures are indeed needed.

In a statement the credit rating agency said these additional measures are likely to include some dilution of national fiscal sovereignty; potentially some partial mutualisation of sovereign liabilities and resources; as well as measures to enhance pan-eurozone financial supervision and intervention, combined with further institutional reforms to strengthen eurozone economic governance.

Up from 58 per cent in the Q1 2012 survey, 71 per cent of respondents to the latest survey believe fundamental credit conditions for the fixed income sector will deteriorate. Investors were also concerned about refinancing prospects, with 79 per cent voting it the most challenged sector - an all-time-high. This dissatisfaction resulted in 49 per cent of investors electing developed sovereigns as their least favoured investment choice. This is up from 31 per cent in the last quarter - and is a new high, beating the 46 per cent recorded in Q2 2010 during the midst of the Greek crisis.

Fitch expects the eurozone to get through the crisis, with gradual steps towards closer fiscal and economic integration. However, it does not rule out other outcomes, particularly until economic recovery is underway and unless there is greater progress in reforming the eurozone.

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