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BlackRock head of global rates Eric Pellicciaro gives his outlook for the Fed and Treasuries.
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-- well Erica hello Charles is here with -- head of global rates investment over black -- here in the studio and when we get these fed minutes but board generally speaking.
-- a lot of pressure on central banks including our own to acts here do you think the Federal Reserve is is is going to and if so what the effect might be.
Yet at the Federal Reserve is gonna continue to act but they may act in ways that could disappoint some investors -- they think the twist which they've done an extended after the end of the year is a really big deal -- think it's as important as QE.
Am -- -- investors feel that way or truly understand the impact of it and so forth what I would expect from them rather than QE this year.
Which I think the bar is very high to get that done.
Is rather language shifts so I think the most important thing for investors to look at resembled today's minutes.
You want to hear discussion about pushing out that 2014 commitment to 2015.
I think in the next meeting there is no adjustment -- that commitment I think they'll be some disappointment.
But frankly we would let's take a look at that while we're -- and -- -- the ten year treasury is doing is this judge is that justified.
Based on the stated that one and a half percent.
Based on the state of the global economy based on what the Federal Reserve is gonna do because.
Again we've talked about how dangerous it would lead the heels can get and that potential long lawsuit -- experience.
At least.
If -- if yet if rates go higher but.
Does that worry you how low these rates are.
As an investor yet as an investor it doesn't in the context globally if you look at global high quality yields they're all about that low summer even lower.
US treasury has benefitted from its flight to quality.
At the same time there's not a lot of fixed income supply there's not a lot of credit that's coming out and the Fed is hoarding.
If you will a lot of treasury bonds and a lot of government mortgage backs and that's taken away a lot of the supply from the market my expectations for -- you know yields -- not to move much.
And if you're long term investor and looking at these deals they don't look great in treasuries you should be pushing NAFTA corporate bonds.
High yield bonds structured products if you will all -- all of these -- first half of the year -- all of those riskier fixing compacts have outperformed and outperformed our continued I would continue to think they will outperform but you're not as emphatic as some -- -- of the gets a committee -- it just treasuries there's just no reason -- I can't make a case -- idiotic it doesn't make -- we've had some people come and be very aggressive in that way -- and you -- -- -- -- I'll make the case that treasuries have to have good value in your portfolio.
If you're diversifying out.
Credit risk equities commodities the correlations -- there.
We have -- deeper slowdown we have more the prices of Europe we're -- -- one and a quarter -- of 1% on the ten you know they're gonna protect your portfolio what are the odds of that happens deeper crisis.
Deeper on dip in terms of global economy well I think the fact that the Fed is is not necessarily inclined to do QE this year which is which is which is.
Our our view.
That's probably gonna leave -- lower in yields quite frankly to more more risk out there from Europe coming from economics itself right -- I would continue to be cautious.
In playing shorts in treasuries or or or you don't wanna be defense about insurers I would continue to be cautious and do you do lots of risks out there three just back into a headline that -- -- from BlackRock things -- recessions coming here in the US is that convocation here.
No act act actually not and I can I think the US will outperform.
Other countries and other other kind of major economies what's interesting is getting into the second half of the a lot of -- once it's gonna help the US got.
Cheaper gas prices you got lower mortgage rates lower corporate rates are -- Cheaper input prices to the production process all this is really important the US disproportionately benefits from the and other countries so even if there is a slowdown in three Q -- we have a coming slowdown data continues to -- it's gonna be shallow and apparently an opportunity to buy so.
Tail -- not headwinds for the US at least a half the year -- that dovetails.
Perfect away with -- coming next guest Eric thank you so much -- -- -- -- fair share out Keller Tara.
