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RBS Securities’ head of Treasury strategy Bill O’Donnell on whether investors should consider buying more bonds in this market.
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O'Donnell's ahead of treasuries and treasury strategist for Americans at RBS pleased to have join us once again he pillow is wonderful -- -- let's start with your take on a selloff last Friday after the strong February jobs report what's the message from the bond market there.
-- the message from the bond market is is that they expected a strong number but it was stronger than even the most up -- optimistic.
Economists had -- had expected so that treasury market was caught a bit flat footed.
And that's what helped to bring.
Treasury yields up to some of the highest levels that we've seen this year.
Although we did see good buying.
When we reach those -- So you're not readjusting your range for the ten year yield right on the back of the outcome of that jobs report so what should we expect for the ten year yield here for the next couple months.
Well we're looking for a range roughly defined as something around two point 15%.
Maybe down to 18170.
Somewhere in that region.
That's where support resistance comes up and it's our expectation that.
When you have data like we saw on Friday with a good jobs report.
Very strong housing sector.
Improving bank and household balance sheets all of that is helping to lift -- for up above the range that we had for example last August to December.
Which was 155.
To 187 in ten year yields we just moved to a higher range.
On the other hand keeping rates -- uncertainties about sequestration job cuts that we still have to see.
In the coming months as well as the guiding hand of the Fed which is repressing my beloved treasury market.
I know rights contained.
It's true right it's kind of a can then Germany.
Many strategists are saying yourself included that the treasury rallied the last computers is growing long in the tooth but.
That's surprisingly strong jobs report and you've increased -- range.
Increase your yield range to a higher level we're the best entry point do you see some more buying room for for bond -- do.
Increase -- allotment in your portfolio.
What we actually saw some very good buying on Friday after the jobs numbers.
Ten year yields were pushing upward to around two -- seven and 209%.
And we saw some domestic long duration.
Fund managers commend him by just as they did on February 14 when -- were lasted to a sixth.
So it these levels.
You know especially for a longer maturity treasuries attracting BI.
Of insurance companies and pension funds send I'm impressed by the flows and that sort of makes -- more comfortable about our range outlook at least at on the upside.
You mention -- fed keeping rates capped.
If its earliest start considering an exit strategy or what that might mean for the bond market -- concern about roiling risks there I don't know if that's a phrase that you know what my question.
Oh absolutely and you know realistically it was a risk that the market was focused squarely on in January and February.
But the recent testimony by the Fed Chairman as well as another speech by -- -- Janet Yellen.
Pretty much -- those fears.
Yeah and -- you know we have relatively tepid -- inflation.
At least some as as the government measures that.
And have by the same token it's -- it's -- employment separate fed.
And I I would take I would expect that they're still not all that enthusiastic about even the seven point seven.
Percent unemployment rate right -- a lot of that came from people who left -- you know the labor force.
And bill I got to run but I have to ask you one final question about your advice and went to refinance your mortgage because you keep my producer.
Some insight ticks on that I would -- future for our viewers.
Yeah -- I I like the positioning in the treasury market it's a lot less long so that tells me that balance sheets are positions are clean.
-- like the fact that were up near the top end of the rate range so I think anybody looking to refinance their mortgage ought to wait another two to four weeks.
You might get another eight there twenty file or -- percent off on your mortgage vs today's -- wonderful stuff today bill O'Donnell check -- again -- thanks again thank you.
