Hi, I'm Nick Tripodes, Portfolio Manager and Senior Investment Analyst at Federated Investors.
How are you positioning your portfolios based on the current low-rate environment and growth slowdown?
Well, we've extended our duration, because we expect interest rates to continue to decline. If you look at the Fed, they're really in an easing mode right now. They've lowered interest rates, we think they might lower them in the future. The manufacturing numbers are a little bit weak, inflation's a little bit lower than expected so we think we're still in that declining interest rate environment. If you look at world wide interest rates they're still very low. They're actually negative in areas like Germany, Japan, a lot of regions in the world have negative rates.
So, we think that declining interest rate environment is a good way to extend our duration, at the moment. Also, we're using a barbell approach, a combination of floating rate securities and fixed income securities. So, some of these floating rate securities actually have higher yields than fixed rate securities. But, that also allows us to keep our duration short. In addition, we're still very positive on credit products which are, you know, both investment grade corporates and also asset-backed securities.
Views are as of October 21, 2019, and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. Bond prices are sensitive to changes in interest rates and a rise in interest rates can cause a decline in their prices. Ultrashort bonds and portfolios of ultrashort bonds are not money market securities and these securities and portfolios will fluctuate in value. Some money market funds attempt to maintain a stable net asset value. Duration is a measure of a securitys price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than securities of shorter durations.