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Janney Chief Fixed Income Strategist Guy LeBas offers tips on investing in bonds.
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Thank you very much David the Federal Reserve has decided to keep its stimulus in place again this been going on for awhile.
Saying that economic growth has stalled -- -- just kind of grinding along following a zero point 1% -- traction in fourth quarter gross domestic product so.
While the Fed doesn't think this particular pull back the last what does it mean for fixed income you might -- -- talking about treasuries here.
-- -- -- -- jamming chief fixed income strategist to really clarified -- she's in Philadelphia.
-- first of all.
What do you anticipate will be the biggest a rebound effect from this negative albeit slight GDP report.
Well to be honest I think the markets are really interpreted this as a in the passes a one time items meant as -- heard numerous times throughout the day today if you break it down.
This core components of economic growth namely consumer spending and business investment.
We're actually doing okay during the quarter once you take out the effects of inventories.
And a major major pullback in defense spending so the markets as we can see by by the numbers especially the bond markets.
Haven't really attributed very much long term growth impact of this number.
All right so the three biggest things and that's what we really wanna get -- for the three biggest thing that investors need to keep an -- -- if they're interested in fixed in come.
Which does -- might everybody have a much broader definition and just basic US treasuries.
Both three things I would -- their policy policy and policy and they're different types of policy of course.
A number one is fiscal policy and we saw a lot of the drama that unfolded just about a month ago or so here.
And how that impacted the markets -- an impasse within congress and the impending fiscal -- Created a really really strong safety bid for treasuries that could reemerge next may depending on how the sort of updates to that fiscal situation and number two is monetary policy at the Federal Reserve.
They didn't do anything today but there's a potential towards the middle of the year the Fed to say -- you know guess maybe this bond buying think isn't really work and all that well maybe we should rethink it.
The third type of policy really stems from the ECB and the EU -- -- doing their level of support their level of fiscal austerity within a constantly Europe.
That hasn't affected the US and some months here but it could come back later in 2000.
They're so you're advising stay away from basic US treasuries go to war to corporates now guide us because.
That's triple -- that double B to B plus B minus.
-- -- because -- but let let's just get to where you find the parameters and what you like within those parameters.
Right -- the key here is all those policies that talked about a minute ago what they do is that they affect the level of interest rates and they don't have a great impact on corporate health in particular.
And so as a result when we look at corporations and municipalities.
There's sort of internal health their fundamental -- is doing quite well real canary young buyer I mean right in order -- people -- -- -- -- do you like to stay within a certain level or above a certain level.
Well our favorite areas -- bond markets credit markets right now are triple -- investment grade corporates and double B.
Rated high yield corporates -- kind of that.
Mid level of equality predominantly -- like any sovereign debt that's out there any different countries other than the US.
Well I think their biggest pick on the sovereign debt side would be Australia and that's for two reasons.
Number one their interest rate regime is a little bit higher than it is here in the US and Europe and also they have the potential to benefit from currency appreciation.
Particularly if -- Chinese growth picks up in China continues to absorb some of the commodities produced on Australia's northern test.
Do you Abbas saying stay away from US treasuries even though the yield -- -- popped up.
Slightly -- today it went above 2% for the first time in quite a while but still one point 997.
Or 995 depending on the second that you look at -- -- thank you very much.
Thank -- -- any time.
