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Bob Auwaerter of Vanguard on how the bond market is reacting to talks on the fiscal cliff.
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Order is here they had -- big -- -- vanguard he oversees.
About nearly a good three quarters of a trillion dollars -- assets Bob it's always fantastic to see it.
Tell me about -- reaction that you're seeing in the bond market to what it is our -- is not happening in Washington right now.
Well I wish those two congressmen were involved in the negotiations unfortunately the guys at the top.
Seem like literally digging in their heels in the markets reacting to that you're having a flight equality.
And that treasury securities right now the ten year benchmark treasury is nearly at its three month low yield which is a typical.
Reaction one when the markets are worried about the economy if we drive all the fiscal cleft between now.
And the ended the year you could see GDP in the first quarter of 2013.
Drop -- very sharply.
Bob do you think it -- -- the yield on the ten year and the buying in treasuries can continue -- how low can attain your ago at this point.
While we week we certainly could go.
-- lower.
Really depends a lot on the rhetoric that is taking place in that.
And Washington.
You -- -- from my personal upper prospective deal on one -- -- Thought was even attempting to put -- -- branch out there to some degree was house speaker.
Boehner.
Mitch McConnell is dig in his heels of the Democrats in the senator -- in her heels and the president appears to be doing the same as well.
Now so we're gonna have to see what happens.
What is been their reaction in the corporate bond -- -- I know the spread between corporates and treasuries has gotten wider but is that just simply because the yield on the -- -- all in our -- seeing.
He's seen selling and corporates at all.
We've seen some selling at take place corporates are are linked to equities two -- some degree we all seen the trade off take place in inequities.
There's been several -- new issues which have come to the marketplace.
Over the last several days if you looked -- a couple weeks ago they were substantially oversubscribed that is not the the case right now.
What it's if you if you look at one place were her as the markets have benefit from all this it's been on Munis.
Ten year now long term triple -- Munis have reached all time record lows there's been a lot of demand take place.
Certainly all this discussion about tax increases.
As or gotten people though worried.
Also there's been -- dollar impact it is well there was a series of ballot measures.
That took place last Election Day and the ones that were passed were generally bomb marketed.
Friendly -- for example in California.
The -- income tax top rate was raised up to thirteen point 3% that's gonna help California's credit.
And it's also gonna increase demand for California tax exempt Muni bonds.
I'd bet that makes a lot of sense like you've increased demand don't converter -- Further borrowing rises so they did it borrow money more is -- but then they've got more revenue -- -- and hey Bob all of those groups treasuries corporates and Munis really quickly are any of them attractive to you as a bond manager here.
I would probably leaned toward Munis with corporate second -- -- all to believe this fiscal -- thing is gonna get fixed.
And has to.
If if congress continues to door roll around economies is gonna fall flatness face.
And the first half of 2013.
-- -- ultimately expect treasury yields have moved back up.
Bob good to see you as always thank you so much.
There's star and you got some race and to watch this weekend -- the final Sprint Cup race and your F one race in Austin, Texas just so you know -- past that are integrity is Austin, Texas -- have a great weekend -- -- quarter of vanguard.
