Global bonds rally after Japan’s move

Global bonds rally after Japan’s move

MARKET HAS COME UNDER PRESSURE AFTER STRIP THE U.S. GOVERNMENT OF ITS LAST TOP CREDIT RATING. HOWEVER, PLENTY OF GOVERNMENTS ARE TRYING TO REASSURE THE ABOUT THEIR CREDIT WORTHINESS. LET’S GET MORE FROM CANNOT BE GOLDENBERG HEAD OF U.S. RATES STRATEGY AT TD SECURITIES. THANKS VERY MUCH INDEED FOR JOINING US. THANKS GUYS GET IT. WE HAVE SEEN THIS PHENOMENON OVER THE PAST FEW MONTHS. PEOPLE NOT JUST WORRIED ABOUT THE U.S. DEFICIT, BUT THE STABILITY OF COMMON FINANCES IN EUROPE JAPAN. >> YEAH, I MEAN, YOU REALLY HAD A LOT OF FOLKS WORRIED RISING LONG-TERM INTEREST RATES ACROSS THE WORLD. I THINK PART OF THAT IS INFLUENCED BY RISING DEFICITS ALL AROUND THE WORLD HAVE SEEN EUROPE FUNDING CERTAINLY SEEN RISING INTEREST RATES AS PLAYING A BIG PART OF THIS. AND CERTAINLY THE THE RISING DEFICIT EXPECTATIONS. THE U.S. ARE PLAYING A BIG PART AS WELL. TERM PREMIUM GO UP IF SEEN LOTS AND LOTS OF NERVOUSNESS. BUT I DO THINK WHAT YOU SAW THIS MORNING, WE’RE AT OUR WITH THE MINISTRY FINANCE, POTENTIALLY LOWERING SOMEONE I THINK PLAYS VERY WELL INTO MARKET FEARS HELPS ALLAY SOME OF THOSE OR IS THAT DEFICITS ARE JUST ON EVER RISING TRAJECTORY AND THAT THE LONG AND IT WILL COME UNHINGED. >> THE INFLATION, OBVIOUSLY A HUGE DRIVER FOR A LONG BALL AND THE INVESTORS WITH HOW ARE THEY FEELING? ARE THEY WORRIED ABOUT INFLATION OVER THE NEXT DECADE SITE? I YOU KNOW THE QUESTION AND GET THE MOST OFTEN IS FRUIT FROM THE FED, AT LEAST WILL ABLE TO FEATURE 2% TARGET. WE THINK THEY AT LEAST OVER THE NEXT DECADE OR SO. CERTAINLY THE NEXT YEAR OR 2 ARE GOING TO BE A LITTLE BIT MORE GIVEN SOME OF THE TRADE UNCERTAINTY. I THINK OVER THE NEXT DECADE. I THINK 2% IS STILL VERY MUCH DOABLE, ESPECIALLY GIRL STARTS TO MODERATE CERTAIN BECAUSE OF ALL OF THIS UNCERTAINTY. >> YOU KNOW, A LOT OF INVESTORS OUT THERE ARE WORRIED THAT PERHAPS THESE, YOU KNOW, 2% INFLATION TARGETS ARE A LITTLE BIT TOO LOW. THEY’RE PRICING IN A LOT MORE INFLATION PREMIUM, A LOT MORE RISK PREMIUM IN TERM PREMIUM FOR HOLDING ON TO THIS DEBT, WHICH IS STEEPENING GLOBAL YIELD WHICH IS WHY I THINK, YOU KNOW, YOU’RE SEEING RATES MOVE HIGHER AND HIGHER ACROSS THE WORLD. BUT AGAIN, A LOT OF THIS WILL DEPEND ON WHAT HAPPENS TO GLOBAL SUPPLY. AND IF GETS PAIRED BACK AS WE START AS WE STARTED TO SEE WITH, YOU KNOW, INDUSTRY FINANCE IN JAPAN, FOR EXAMPLE, I WOULDN’T BE SURPRISED TO SEE THE LONG AND COME UNDER A LITTLE BIT OF CONTAINMENT. TO YOU. I DO BELIEVE THAT IN THIS, HE SAYS THAT THERE’S BEEN A FLIGHT FROM U.S. ASSETS BECAUSE OBVIOUSLY, THAT WOULD TEND TO PUSH UP THE LONG-TERM YIELDS ON U.S.. BONDS ON THE COST OF FUNDING FROM THE AMERICAN GOVERNMENT. >> WELL, I THINK BETWEEN THE DOWNGRADE FROM MOODY’S AND SOME OF THE WORRIES ABOUT DEFICITS. THERE’S DEFINITELY, YOU KNOW, AND CERTAINLY TRADE UNCERTAINTY LOW. LESLIE, FORGET ABOUT THAT. THERE’S DEFINITELY A LOT MORE QUESTIONS BEING ASKED ABOUT, YOU KNOW, THE LONG-TERM STABILITY US FINANCES THE LONG-TERM U.S. DEBT. I THINK RIGHT NOW IT’S MORE QUESTIONS THAN ACTUAL YOU KNOW, IS ON THE ROAD IN EUROPE TALKING TO INVESTORS JUST A COUPLE AGO, MOSTLY INVESTOR TALK TO WORK MATERIALLY CHANGING THEIR PLANS, BUT THEY WERE WORRIED. IT’S A QUESTION THAT CAME UP IN JUST ABOUT EVERY SINGLE MEETING. VERY FEW PEOPLE ARE ACTUALLY PULLING MONEY OUT. MOST OF THEM WERE BASICALLY DISCUSSING IF HE WERE TO, YOU KNOW, WHERE TO GO. AND UNFORTUNATELY, THERE’S NOT THAT MANY ALTERNATIVES TO THE U.S. TREASURY MARKET. IT’S JUST IN TERMS OF DEPTH LIQUIDITY IN SIZE. >> THAT’S THE THING, IS THAT LIQUIDITY BREEDS. THEY COULDN’T SEE A PEOPLE GO TO ACT TO MARKETS THEIR ACTION WHAT ARE YOU TELLING CLIENTS RIGHT WHO WONDER WHAT SHOULD I GO? 5 YEAR BONDS OR 10 YEAR BOND SAID CANNOT BE. I KNOW IT DEPENDS ON THE PORTFOLIO OBJECTIVES, ET CETERA BOOKS WHICH LOOKED LIKE THE BETTER BUY IN THE U.S. MARKETS RIGHT NOW. >> YOU KNOW, I THINK 5 YEAR IS ALREADY WERE A LOT OF MARKET PARTICIPANTS ARE THERE’S A LOT OF FOLKS OUT THERE WHO ARE IN THE KIND OF THE 2 FIRE PART OF THE CURVE BECAUSE IT IS SOMEWHAT LOWER RISK. YOU ARE MORE ATTACHED TO FED FUNDS EXPECTATIONS. ONCE YOU GET UP TO THE 10 YEAR PART OF THE CURVE, YOU’RE TAKING ON A LITTLE BIT MORE TERM PREMIUM I THINK THESE LEVELS CO FOR ABOUT 4.50 ON 10 YEAR TREASURIES FOR 50 TO 4.60 AREA IS ACTUALLY QUITE ATTRACTIVE ON US. TENS PART OF THAT IS ALSO BECAUSE REALLY TWOFOLD ONE, WE CAN SEE DEFICITS BEING ADJUSTED A LITTLE BIT BECAUSE YOU KNOW, THE MARKET IS VERY WORRIED ABOUT THIS. BUT IF DON’T, THE TREASURY COMES OUT AND STARTS TO TALK ABOUT POTENTIALLY LOWERING LONG ISSUANCE. A MUCH LIKE LASK, YOU COULD SEE A REALLY BIG TAILWIND TO THE LONG. THE OTHER PART OF THIS, ALSO THE REFOCUS AND ECONOMIC DATA AS SOME OF THOSE HARD DATA STARTS TO COME IN, ESPECIALLY FOLLOWING LIBERATION WE COULD SEE A LITTLE BIT OF SOFTNESS PEAKED THE MARKET WILL FOCUS MORE ON THE DATA SIDE, RATHER THAN JUST DEFICITS AS THEY’VE BEEN SOLELY FOCUS IN THE LAST COUPLE OF I CAN CERTAINLY SEE US AS THE MARKET SHIFTS ITS FOCUS ON ECONOMIC DATA, YOU COULD SEE INTEREST RATES START TO DRIFT A LITTLE BIT LOWER AS WELL. SO I THINK THE 10 YEAR PART OF THE CURVE MAKES A LOT OF SENSE AT THIS POINT. WHAT ABOUT ABOUT THE 30 YEAR WHO BUYS THE 30 YEAR ACTUALLY GET OUT THE I MEAN TO MANY PEOPLE ACTUALLY PLAN TO HOLD A 30 YEAR BOND FOR 3 DECADES. >> WELL, YOU KNOW, THERE’S THERE’S A LOT OF LONG-TERM INVESTORS OUT THERE WHO HAVE LONGER TERM LIABILITIES AND THEY NEED TO MATCH THOSE WITH LONG-TERM WHAT YOU KNOW, WHAT I THINK ISSUE IS RIGHT NOW, IT’S NOT THAT THERE’S A LACK OF INVESTORS. THERE’S A WORRY THAT PERHAPS THERE’S TOO MUCH SUPPLY AND TOO LITTLE COMMAND. AND I THINK THAT ALL COMES RIGHT BACK THE U.S. TREASURY. THEY HAVE TO DO THERE SURVEYING, THEY HAVE TO FIGURE OUT IF THAT IS INDEED THE CASE. AND TO SEE IF PERHAPS THEY SHOULD TRIM BACK ALONG AN AUCTION CAN CERTAINLY SEE A TRUCK. ATTORNEY SECRETARY BESSENT COMING OUT, MAYBE AS SOON AS THE AUGUST REFUNDING MEETING OR MAYBE EVEN SOONER AND DISCUSSING POTENTIALLY TRIMMING BACK 2030 YEAR ISSUE JUST MARGINALLY AND ENCOURAGING MARKETS. AND THAT THAT WOULD REALLY DRAW SOME CASH RATE BACK INTO THE U.S. FINALLY GETTING OUT OF THE CURRENT INTEREST RATE ENVIRONMENT IS IS UNFAVORABLE FOR BIG INSURANCE COMPANIES. FOR EXAMPLE, WHO WHO LIKE HAVE ASSETS THAT WILL DELIVER RELIABLY FOR DECADES AS A ISN’T ATTRACTIVE FOR THE BANK >> FUNDS LIKE THAT. I KNOW IT’S A VERY BROAD QUESTION. THAT’S THAT’S VERY FOR IN IT IS A BROAD QUESTION, BUT I THINK IT YOU HIGHER INTEREST RATE ENVIRONMENT DO TEND TO BE FAVOURABLE FOR A LOT OF LONG AND INVESTORS, INVESTORS LIKE THAT TEND TO PREFER CORPORATE DEBT FOR A VERY LONG PERIOD OF TIME. >> AND AS YOU HAVE HIGHER INTEREST RATES AND OF COURSE, WIRE CORPORATE BOND A LOT OF THESE INVESTORS WILL GO INTO LONGER-DATED ASSETS AND WILL LOCK THE MAIN AT THESE MORE FAVOURABLE LEVEL. SO I THINK FROM ALL-IN YIELD STANDPOINT PERSPECTIVE, I THINK IT’S A VERY ATTRACTIVE ENVIRONMENT FOR THESE LONG AND INVESTORS AND THEY DOING THEIR OWN ASSET REALLOCATION IS POTENTIALLY FROM RISKY ASSETS TO ACTUALLY SOMETHING A LITTLE BIT LESS RISKY LIKE BONDS. GENNADY, THANK YOU VERY MUCH. INDEED. THANKS FOR GETTING IT

Gennadiy Goldberg, head of U.S. rates strategy at TD Securities, shares his analysis of the market as global bonds rally after Japan’s move.

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