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Is Cash Better than Debt?

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  • Description

    RBS Securities head of Treasury strategy Bill O'Donnell gives his outlook for Treasuries.

  • Duration 3:47
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-- -- -- investors continue to -- in the US treasuries holding yields near record lows should investors follow the stampede into US debt -- my next guest says in this volatile environment cash.

-- when the best places to be no surprise of course joining us now.

Bill O'Donnell -- treasury strategist at RB yes -- it's great to see thank you so much for being with us.

Singing at this morning you say the stampede a flight to quality continues.

So you think yields with the ten year to -- and a half percent is properly reflecting what's going on in the world.

I would even argue fully reflected.

You know fully reflecting a lot of the downbeat news that we've gotten out of Europe.

The weakening trend in.

Domestic employment conditions and the overall weakening trend didn't.

In global growth.

The difficulty I have with the treasury market here besides the fact that we're at all time lows in ten year yields in US history.

Is is just the fact that there are a lot of indications that PE you know many people that were short in March at 240 and tenure yields have covered.

Sentiment is quite bullish on bonds and being evict the question I ask is is there any meet the left on the -- thirtieth I don't see there is because again -- -- -- this morning people are looking for yields to stay is depressed levels all the way through the election.

-- -- -- -- our outlook is so unfortunately very much the same the uncertainties.

As we all know -- huge besides the Greek election on June 17.

You have the potential for you know business investment business hiring and even domestic consumption to slow.

Going into the election in -- and therefore the tax uncertainty much like we saw back in 2010.

The Fed is certainly watching for signs of that.

And I know the federal argue that there's the potential that the recent weak readings in nonfarm payroll or just to get back from weather related spikes.

At the end of -- last year in the beginning of this year.

But of course -- -- backdrop to that is that this election uncertainty may cost businesses and households to pause which is a real threat.

That we think could bring the Fed -- as soon as the June 20 FOMC meeting with additional power.

-- -- But what about this the other side of the argument on whether -- -- get another round of well it all goes back to what Janet Yellen and others have referred to is.

As that it that the flow in the stock -- to the extent that the Fed takes their balance sheet makes a bigger.

You know I can only -- help us as opposed to a detriment.

Perhaps.

Further.

For yields further in the curve I think that -- that thirty people that on the thirty year bond -- may take issue with the bigger fed balance sheet that's being inflationary.

But in general I I think they'll argue that either through language.

Or through additional policy steps.

Anything they can do in this uncertain environment is isn't in net.

Benefit -- the economy.

Going on with the seasonality evolve this in other words you even point out that first and fourth quarters tend to be strong appointees three quarters these need your quarters or just -- dismal and you can we chalk up some of this pessimism to that.

Boy I'll -- what it's just amazing how these seasonal common -- you get very good.

Growth right around the holiday season and at all sort of falls apart along with Europe every spring.

We seem to be going through the exact same emotions as we have -- the last couple years.

And unfortunately we just don't think that conditions are going to ease up anytime soon or improved to get yields back up.

We just expect ten year -- -- -- no one and a half to 2% range for the balance of the year at least until the election okay they'll covered a lot and a lot of territory thanks for your time and your now thank -- O'Donnell thanks.

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