Also in this playlist...
This transcript is automatically generated
All right Nicole thank you very much while the Fed driven turmoil has hit the ball market with the yields on the benchmark ten year treasury hitting levels well we haven't seen since.
Back in August twenty all album -- S&P.
Shocked the world with its downgrade of US that remember that -- it seems like ten years ago now what will the bond -- continued.
As -- senate prepares its exit from quantitative easing let's bring in Scott Graham.
Head of US government bond trading of BMO capital markets.
Scott thanks for joining us.
Also a lot of fear by settling yesterday.
That that of course has a tendency to feed on itself.
Was it over done.
But I think that the defense statement certainly cut a lot of people off guard I think the Bernanke has been very clear that they intend to stay at the party.
Well into an economic recovery I think people felt that the -- didn't necessarily justify.
Talking about tapering but I think he also made it very clear in yesterday's comments that the risk rewards of continued quantitative easing may have run their course.
What was so pretty decent sell -- no doubt but could you what you do is -- a good time to put money in into the bond market.
-- I would argue that you know it is but I'll ride my certainly my views are that the B overshoot to the downside and as we approach to 5010 year notes.
It certainly will at least for the short term or entered an intermediate term making a decent buying opportunity.
The sell off that we've seen in the marketplace is certainly a lot of people who hated being on on comments that they didn't expect from the Fed.
Who -- also take into account the fact that the higher interest rates will have a dampening effect on the economy.
And perhaps for create an opportunity for the market to have one for the rally so we talk about they had the benchmark ten year.
Blonde Scott what's the range now two to two and a half percent is that reasonable on the yield.
I would think that that's very reasonable -- -- if if we are going to overshoot it would probably.
-- just slightly higher rates as you know investment committees get together and decide whether.
The other -- catering tapering is going to have a meaningful impact but again I I think my premises that.
-- the of the economy continues to be somewhat fragile we've gone through reed that -- The -- the tax increases in the sequester in the -- proven to be quite resilient.
We still have some potential -- from Europe and and other countries but at the end of the day I think that that two and a half to 2% range makes a lot of sense for the balance of the year.
Do you think we see the Fed's bond buying program as being perhaps more important -- it really is to the bond market the other man I know it's 45 billion in treasuries every month.
They're not exactly cornering the market is it.
Well I mean as a percentage of net assets and net issuance in the back in the marketplace it actually is it quite substantial amount.
What I would argue though as we get to thirty year interest rates back towards three and a half and strips -- that sector at 33 quarters they do make very very attractive alternative.
Real rates at the 137138.
You know a very -- staying -- and attractive alternative to right now what's going on with the equity markets.
What other areas of -- come do you like Scott.
But you know I think that in -- in this last kind of so often in this -- as you are seeing a lot of people hit the exit.
I fixed income was had a -- run for quite some time now spreads could have compressed quite -- I would -- -- -- spread project continued to widen -- here but I think that mortgage backed securities ultimately are gonna look it would be very all turn attractive alternative.
I also think that where we are in the rates market the belly of the curve -- -- look we -- very.
Reasonable place to invest some money.
If you haven't.
Fled to the exit so to speak and hunkering down is that the best thing to do for now until the dust settles in the bond market but yet.
That is if you if you're not sure that the the sell off is over I think that the front end and again I think that there's two things that we need distinguish here Bernanke was -- -- really about.
Taking his foot off the gas pedal IE not hitting the brakes.
He's also reiterated the short term rates are gonna remain low for a substantial period of time.
We have seen the front end and in conjunction with the back and back up quite substantially I think the front end.
As a a safe haven any kind of a flight to quality law offers a very attractive alternative.
There ain't it great information Scott Graham of the BMO capital markets thanks for joining us.
Filter by section