You're watching...
Janney Chief Fixed Income Strategist Guy LeBas on why the May jobs report may increase the chance that the Federal Reserve may take further steps to b...
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
With the jobs numbers coming in far below expectations and ten year treasury yields hitting yet another record low one strategist says mark your calendars.
Because June 20 has now become the most important day of the month.
Do you Abbas is chief fixed income strategists at Janney capital markets and he joins us now.
All right we're all waiting for the reason that by the get that that's when -- the quantitative -- and we we heard about quantitative easing but then they'd.
They got into this this thing where they.
They exchange short term bonds for long term bonds and that ends at the end of June right.
That ends at the end of June and June 20 the day that that kind of -- has not just the most important day in June the very well maybe the most important day of 2012.
Is sort of twofold one is -- -- a couple days after the results of the next Greek parliamentary elections.
So -- -- fleshing out over who is elected and what their positions are.
Or also gonna get the Federal Reserve's next decision which -- after this morning's payroll data is really probably leaning towards another additional measure of stimulus -- not what -- easing.
Let -- in what form -- would we see that I mean we've we've seen all different kinds of of measures of what they do but what would it look like -- any idea.
Well we think that because of all the political pressure that's been exerted on the Fed about long term inflation risk.
And the Fed's own pressure it's not going to be just outright crazy bond buying I think it's gonna be a little bit more subtle -- that.
Perhaps an extension of Operation Twist -- we call sterilize quantitative easing which came up earlier this year.
Now -- -- let's let's just be specific all these terms are thrown out there and it kind of go over people -- but what you mean by sterilized.
This essentially it's it's the Fed.
Printing money.
-- giving that money essentially to body up all these treasury bonds and other instruments.
And then.
Borrowing it back those that that money that they've already printed up and given out to the -- -- it sounds too clever by half.
-- -- -- sterilized quantitative easing is unlike just rampant bond buying it doesn't actually increasing amount of cash -- in the -- -- what's the per episode series B let this play what is the purpose up.
Well the purpose is drive long term interest rates a little bit lower to stimulate a little bit of inflation but not too much which is always the Fed's goal has become very very tricky in this.
-- you saw on massive flight to quality looking at these ten year treasury -- -- want what it was one point 442.
Unbelievable that people would give their government that money for such a pathetic return.
But hey at least it's a return is is this a Smart move or should people be in the shorter part of the yield curve.
Well we're not recommending investment in the treasury sector at all right now at all -- of this crash down too low too quickly.
And we're gonna see a reversal of that and I think we've got not always sums.
Very highly negative economic expectations priced in.
But also -- -- implosion of Europe and realistically neither of these events are gonna come to pass in the long so much room for yields her eyes are fixed income strategist saying.
Not the time to buy treasuries what are you buying in the fixed income area.
Well right now we're actually targeting that same date June 20 as a potential date to get very aggressive.
In more credit sensitive bond such as high yield corporate bonds -- and also elements of the municipal bond market.
And general Munis are very attractive right now they're yields having fallen nearly as far as treasuries good point Keith good to see thank you for joining us excellent stuff there's always apply when when even in a doomsday scenario there's a marketplace thanks -- -- fixed income strategist.
