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Vanguard head of fixed income Bob Auwaerter gives his outlook for the bond and European markets.
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News channel.
Longer term interest rates have been heading back up.
But is this helping Bob low order is the head of the fixed income group at vanguard -- oversees about 700.
Dollars and assets Bob if you look at -- rates taken back up is this a good thing.
Or is that an interest thing environment.
-- we have some rhetoric -- European central banks.
Saying it will do whatever it takes to save the Euro so we've had.
The flight equality.
Has disappeared -- treasuries -- yields have backed up about 35 basis points.
Credit spreads tightening -- volatility is gone down so.
The markets feel pretty good right now plugged in -- my mind we haven't had much in the term of action so far just Lotta rhetoric so.
To paraphrase the old commercial where's the -- It wouldn't walk and -- classic.
For sure what is sitting next -- -- their meetings this week with mark going across wall along that of France and then.
That agrees and there's so much going on in terms of politics is the next truly critical moment.
When that German Constitutional Court -- rule.
On did the validity of that yeah -- bailout facility and that comes in early September.
Right that clearly is going to be a big thing but in the meantime.
-- also gonna have Spain probably asking for more -- further our region's.
The Greeks one a -- -- -- austerity program.
But -- your right to big thing is really the German Constitutional Court they're gonna rule on the legality.
Of whether Germany can participate -- European stability mechanism.
Which is a fancy term for a big -- half a billion.
Euro.
500 billion euros -- 500 billion Euro.
Rescue fund.
And my -- I see for possible outcomes that could rule that -- which I think is pretty unlikely.
-- decide upon and issue an injunction say they're gonna look at it some more.
They could rule and this could really throw the markets into Tizzy fit the German government passed to put it to a referendum.
And boy I'll know what's gonna happen.
There -- could rule yes so is going to be very interesting to see what happens come September 12.
In terms of our -- central bank of the Federal Reserve minutes from the last -- out later today there's the Jackson Hole gathering coming up -- -- It is it back.
-- what do you expect our Federal Reserve to do and what how we act here as Arab Central Bank is it.
Does -- have any bearing at all just in terms of the broad monetary policy on what goes on in Europe and all.
I don't think a heck of a lot right now.
Part of the problem the Federal Reserve Missouri would beginning to run out of bullets.
So I think it was gonna indicate that they want to hold -- -- -- can do quantitative easing.
Again.
But the impact on interest rates is going to be relatively mental -- last couple of times based on a federal reserve bank of San Francisco study and only an impact to raise about ten to fifteen basis points solo or might help the stock market -- that might give people more interest and spending.
Money but I think each time the impact becomes less.
How much time do we -- -- nation have to get our own financial house in order we have an election coming up the big decision the voters have to make about that.
Tax cuts expire at the end of the year automatic spending cuts but how much more time while the markets give us.
To right ourselves financial life.
My in my opinion and -- -- sort of the markets don't see a program a credible process.
Of progress.
I I think you could be in a situation.
Where rates start to move up.
As the markets.
It really charge a credit premium on the United States.
And I think that'll happen gradually and nothing happens I certainly hope that doesn't occur.
What I think you're looking -- maybe a three a four year timeframe.
So had something we have so worry about and I -- worry about it when I think about positioning our funds.
Bob is great to talk to -- as always have to see very -- and I hope you do get some time off because I know how hard to work Bob aware.
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