Mark Cabana, Lisa, Washington discussed on Bloomberg Surveillance
That's when the Fed would get concerned, But I think that you know, seeing the 10 year yield just above 1% does not yet seem to be a level whereby those long and rates are really beginning to bite in terms of the real economy and broader financial conditions Mark Rohnert to the bull market. And the equity space whether it's double digit tech returns, even what we're beginning to see in small cap recovering so nicely. We forget that if I look at Bloomberg Barclays Total return It's been a persistent bull market of higher price, lower, yield and years space. Have we forgotten what a bond bear market is? To some extent, yes, given that U. S interest rates have recently been at historic lows on the equity market did incredibly well despite the pandemic, and I think that the market is going to have to adjust to the notion that long and interest rates will be rising. Now again, we think that this rate rise will not necessarily constrain the economy in a material way if it does the federal step in, But I think investors we're gonna have to get accustomed to the fact that they should expect to see a twist. The prices of bonds go down to some extent as rates three price and growth and inflation does pick up over time. We welcome all of you on this historic day in Washington, Mark Cabana of the Bank of America with US Here on rates, and we do this with futures, red and green in the screen a little bit better tape than three hours ago. The yield 1.1% Mark Cabana, I want you to talk to savers out there, not the fancy guys like you doing fancy hedging strategies and trying to manage with a higher price. Higher. Yield lower price. Milieu. What does the average person do in fixed income if you're telling me higher yield and lesser price? Yes. So I think that if you're a savor, what you want to do is that you want to carefully think about extending out the curve, trying to pick up some additional yield. Based upon your own risk tolerance in your comfort level. Maybe think about moving into the corporate space more than the government space. But you're gonna have to be careful and you're gonna have to recognize that you wanna leg into this strategy over time because we do anticipate that rates will be slowly rising. If you're an institutional investor, what you want to do is that you probably want to Hugh a little bit shorter on your overall duration allocation, as do re price higher. Now we do think that it's great that we're seeing rates move today, given some of the news out of Georgia and the implications that it has for Washington, But we still think that fundamentally the big great re pricing that we'd see towards 1.5% will likely take place in Q two or later. Again as the vaccine is rolled out, And as we get more information, the economy is indeed recovering on a price. He'll basis the fancy guys talk about duration and the second derivative convexity, which I'm gonna call acceleration guys like you call it Gammon up. I don't make a general gamba means I have no idea what gamma means. How about Convexity? Mark? Kid? Banna, what is going to be the accelerated forces as we go through 2001. Also as we go through 2021 11 more thing. We do think we're going to see again is that sell off? That will likely really accelerate again from Q two onwards. Q. One is gonna have a very significant head went from Cove it We don't know how effective the anybody treatments will be to the new strain of the vaccine. We don't know how quickly vaccines will be rolled out. But after that is generally behind us. We do think that rates will need to re price to the new reality of Strong fiscal fairy tale wins and the fact that we're likely going to see the economy operate meaningful E above trend from Q two through the end of the year, and that we think is going to take rates higher. So we do expect to see a more accelerated move leader in the And today, it just seems like the market is reprising a bit more to the fact that you need to sign Hi rods to a democratic control of the Senate. Then you did previously marked Obama. Thank you. So much of the Bank of America this morning, Lisa, come on. I got to go over to you, Lisa. Fancy words here convincing and all the acceleration of price down and yield up Lisa that's positively blooming. I mean, it's always everything so gloomy. You could always paint it from some gloomy perspective. I mean, otherwise, I wouldn't be true to my name. Look, I will say looking at the bond market. There's a real question of what contrive yields higher. I mean, it was really interesting to hear marks a 1.5%. You gotta think of a time when you've got record amounts of negative yielding debt around the world that 1% would look like high yield at what 10.2 buyers start coming in. I don't know, Tom. That seems reasonable, considering the fact that you know, investment grade bonds are building 2%. Not that money. We make jokes about this folks. But I would say that media business media is about 85% equity markets and they toss in a morsel about bonds. Here and there. But Lisa, I'm sorry. What we're talking about is yield up. Whether it's a politics of President Biden and others in price down and it retail. It's easy. You get three months of your statement, and you know you're losing money and you're upset institutionally is Mr Cabana mentioned these air. Really? These are great challenges into, say Fourth of July. Gina Martin Adams of Bloomberg Intelligence yesterday made an incredible point that one of the reasons why evaluations of equities It looked so good right now, even though they're so high on a historic basis is because of how low yields are. At what point do yield start to look more attractive. Given how high valuations are stocks have become the new bonds to so many investors. When does that reverse? And how much does that challenge the feds hand? Regardless of what the economy does, Tom back to the politics of the moment here and of course, last night 10:11 p.m. one a. M. Some movement mineral not minute by minute, but maybe every 30 minutes We had Georgia voting results. I haven't seen any numbers since about five o'clock this morning. Maybe even 4 30 this morning and that's where we are. Now. Let me point out War not takes a trophy against La Flor. AP has announced that along with many other organizations. Jonah's off ahead of Senator produced No but by a razor thin margin, and it is within the recount margin as well That with AP saying, 98% of the vote in stay with us through the morning as we look at that vote return and also the challenges Washington. Isaac Boltanski Compass point with us again, we say good morning across this nation on Bloomberg Radio and Bloomberg Television..