We believe the bias on yields is still up We believe the bias on yields is still up http://www.federatedinvestors.com/static/images/fed-logo-amp.png

We believe the bias on yields is still up

Federated stays short on duration, with plenty to monitor in coming days.
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While the past few days’ steep sell-off in the equity markets and surge in volatility reversed part of the recent run-up in yields, we believe the bias remains upward and thus are remaining short on our duration call for fixed-income products. Federated’s duration committee believes these recent stark market moves are the result of an equity valuation correction exacerbated by the reversal of crowded trades/strategies predicated on previously low volatility. On the other hand, the underlying, persistent dynamic of strong U.S. and global growth, expansionary fiscal policy, normalizing monetary policy and a moderate increase in inflation pressures all remain likely to support an upward trajectory in Treasury yields from current levels. That said, a variety of factors—including March’s looming debt-ceiling deadline and the prospect that the backup in bond yields is somewhat self-limiting given the response of stock markets—urge caution on getting too short and could mute the degree of upward yield movement from here. We’ll keep you posted.

Tags Fixed Income Fiscal Policy Taxes United States Active Management Income