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And except within a good few weeks for the bond market -- investors pulled record amounts out of bond funds on concerns.
About rising interest rates -- no surprise Friday we started to see these shop -- I mean as soon as we got a very solid jobs number of people got nervous.
Are higher rates a kiss of death for your portfolio.
Or just the juice it needs.
Let's bring in two bond market experts are pros with very different perspectives on this try to -- -- Davids are about she's Jeffries chief market strategist along with Kevin get us.
Raymond James Head of fixed income okay first we had.
Two issues here.
If that's what got the Fed minutes out Ben Bernanke speaking in just about twenty minutes we will take -- -- -- just so you know because he's in Cambridge about to speak Peter Barnes is there.
But it cannot bring up Friday cabin where the jobs number came in better than expected and -- we started to see the ten year yields.
Why and how dangerous is that for people's portfolios.
Well if you look at Friday's number.
Liz it was.
They came on a day the day after the fourth of July so you -- look at this almost like it was the day after Thanksgiving from where which traders ran how much they were trading.
-- volume was going to velocity and enough.
On the volatility was great and the number was good -- -- fed off of that.
The -- we turn around Monday if anything came in dropped about seventeen basis points out of the ten year.
As they -- buyer stepped in because there was value there there's that -- that move made a difference so.
You know it's it's hard to figure out.
Whether we are on a trend up straight up in interest rates.
Or just one word were enough -- being tossed for our value it gets created in buyer stepped in as they have with yesterday's -- auction as they have with today's auction so there's still a lot of love value in the bond market -- -- -- They're even though and by the way we should stress that that -- a little bit bearish year he's cautious and yet David you are not you feel that higher rates are quote healthy.
Well let's be clear -- -- quite bearish on the fixed income market -- but I must bearish for the economic outlook or the outlook for risky assets stocks and real estate.
I think it's it's.
He you have to take this all in perspective right we drove.
Nominal interest rates to extraordinarily -- levels the Fed did it on purpose to try to get people out of these assets that was what.
The portfolio balance channel was all about -- Bernanke and I think.
We took these -- stood -- to levels that were were just.
Unsustainable and -- in the end to try to drive people back -- risk taking.
It's been pretty successful okay so not -- -- to move all its kinda kinda move on and I think a few people got confused.
About the goals of the -- but the goal of fed is to briefly that the the risk assets to rejuvenate the economy to rekindle the animal spirits and get us out there.
The entrepreneurs again and not hiding in a bunker holding.
T bills OK Kevin let's get to.
You should start to worry if dot dot dot if rates hit what -- -- arbitrarily say the ten year.
Yeah because that's where the move has been a key for mine that short term rates have been steady because that would indicate the Fed is doing something which are not.
So the market is dictating long term interest rates right now.
In this is where the play is what my own -- -- -- concerns aren't yeah.
Yet how well did it.
Technically you know what and it's in the tenure to 82 or higher obviously very concerned about just what the market is is headed.
Anything north of 3%.
Over the next sixty days is where I'm gonna get really concerned that the market has lost its.
Israel purpose here and that you know you could go 33 record -- 350.
By year end easily -- -- that have to be supported by the data but you know and which I don't see.
David service what is your level it you should start to get nervous if dot dot dot.
There's different levels of nervousness.
I think at the moment.
We're looking at that we're looking at a ten year -- -- light -- Kevin was just describing what we're probably headed up to that three and a quarter three and a half and if I would have told you.
Back in 2006 -- 2007 that the economy was gonna fall off a cliff because ten -- -- -- three and a quarter percent.
You probably -- looked at me like I have three cents.
These are not.
These are not restricted levels of what would be -- restrictive I think a restrictive level -- given the type of growth that we have today given the expectations of growth.
We have today would be somewhere and then afford a four and a half region have gone even.
-- we have vibration you know at five I would get pretty worried.
I mean I don't think we're there yet I don't and I don't think it would happen very quickly and I also think you know accordingly -- -- you know Kevin's right.
You gotta be very careful how you get there so we got a 10220 basis point backup in rates off the lows.
It's pretty aggressive pretty fast -- had too many of these in bond market history.
Let's let it settle a little bit but let's get nervous and -- -- -- dealt with high yield investments as well you know I I do.
And I'm sympathetic to two things that have little interest rate risk and I wanna stay away from duration and Kevin.
How likely you what do you think is okay right now as an investment what.
Yes I'm I'm back up a little bit on the duration curved arm and so you know you you're pretty safe there but I must say that there's.
There's a couple of things you know that that we have to remember is that we're still in a fragile economic environmental and too much of a move up we're gonna there's going to be very painful on that economy thanks to both the -- captain David we'll see you next time we were.
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