Latest / Bloomberg Intelligence / BNY's Loh: Need To Get Used to Lower Yield Environment (Audio)

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BNY's Loh: Need To Get Used to Lower Yield Environment (Audio) · Bloomberg Intelligence

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  Speaker 1: political season? Let's find out more from Arevin Low, Global
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  Speaker 1: market strategist b n Y Melon and joining us now, Marvin,
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  Speaker 1: thank you very much for being with us. Well, thank
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  Speaker 1: you very much for having me again, Pim Marvin. Do
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  Speaker 1: you think that the Federal Reserve is going to do
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  Speaker 1: nothing because we are in the thick of the election cycle?
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  Speaker 1: You know what, I personally do think that they are
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  Speaker 1: on hold. I think in addition to the election cycle,
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  Speaker 1: we still have the potential fallout from Brexit, which, while
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  Speaker 1: you know everyone's being pretty sanguine about it, UM still
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  Speaker 1: has a lot of questions that need to be answered.
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  Speaker 1: So what would those questions be that would satisfy you? Well, um,
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  Speaker 1: you know, the process itself is so unique, um that
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  Speaker 1: we really don't have a lot of history to kind
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  Speaker 1: of base it on. Um. I guess I would lean
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  Speaker 1: towards the IMF report, the report that the IMF put
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  Speaker 1: out earlier this week which lowered global growth. So that's
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  Speaker 1: certainly a big question, and whether or not there's additional
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  Speaker 1: knock on effects with regard to either tightening credit conditions
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  Speaker 1: throughout Europe or um embolding potential other populous movements which
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  Speaker 1: you know certainly have a basis not only UH in
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  Speaker 1: the UK, but around Europe and possibly even here. Well,
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  Speaker 1: I'm going to play to your title as the global
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  Speaker 1: market strategies for just a minute, because you mentioned the
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  Speaker 1: International Monetary Fund, and they came out with report that
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  Speaker 1: suggests that Italy's economy will remain stagnant for the next
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  Speaker 1: get this, twenty years. It is the euro Zone's third
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  Speaker 1: largest economy. Will what happens in Italy affect the United States?
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  Speaker 1: You know, what happens in Italy certainly affects the Eurozone,
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  Speaker 1: and what happens in the Eurozone we've seen from either
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  Speaker 1: a reach perspective or a UM risk taking appetitles in
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  Speaker 1: the financial markets certainly has an impact here. Also, central
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  Speaker 1: banks have been successful in calming nerves in the past,
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  Speaker 1: and I think that's um the point in the cycle
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  Speaker 1: that we're at now. But without really addressing those problems yesterday.
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  Speaker 1: They will affect um, the US, they will affect the FED.
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  Speaker 1: Thought we are a citizen of the world. In that case,
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  Speaker 1: will we catch some of that helicopter money if Mario
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  Speaker 1: drag starts dropping it from the skies? Well, um, at
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  Speaker 1: this point, you know, helicopter money discussion really is more
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  Speaker 1: focused on Japan. I don't think the ECB has taken
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  Speaker 1: a a very strong stance in going that way. But
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  Speaker 1: the trend of lower yields amongst the other central banks
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  Speaker 1: will have their impact on the U S yield curve.
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  Speaker 1: And while we've seen yield rise over the last couple
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  Speaker 1: of weeks, you know, they still are significantly lower since Brexit,
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  Speaker 1: and expectations are that um, you know, the Bank of England, UH,
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  Speaker 1: the e c B and the Bank of Japan are
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  Speaker 1: possibly moving towards the next stage of monetary accommodation. If
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  Speaker 1: they do move to this next stage of monetary accommodation.
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  Speaker 1: What does that do to U S interest rates? UM.
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  Speaker 1: You know, it's it's an interesting time right now because
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  Speaker 1: at the same time that I'm having this conversation with you,
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  Speaker 1: there's certainly a lot of discussion about whether or not
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  Speaker 1: the FED is going to try to hype rates again
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  Speaker 1: this year. You know, we've seen the odds of a
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  Speaker 1: rate hike UM increase significantly over the past few weeks
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  Speaker 1: and never been some pretty high profile stories in the
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  Speaker 1: press about the FED ready to move again. UM. Kind
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  Speaker 1: of trying to put all of that together. While the
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  Speaker 1: FED UM, you know, certainly wants to increase rates to
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  Speaker 1: UM put additional bullets within within their arsenal, our yield
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  Speaker 1: curve is certainly influenced by a lot of these other
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  Speaker 1: yield curves. So the last time I was on your program,
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  Speaker 1: I really thought that we were in a period where
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  Speaker 1: should expect kind of this range bound or lower yield
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  Speaker 1: type environment. UM. Even though we have backed up, we
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  Speaker 1: still remain relatively low by historical standards, if not at
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  Speaker 1: all time low still around the world. And I'll stand
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  Speaker 1: by that thingment. I think that we need to deal
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  Speaker 1: and and get used to this lower yield environment. Well,
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  Speaker 1: I'll just give you the details. Right, the ten uere
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  Speaker 1: right now trades at one point five seven. It is
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  Speaker 1: down seven thirty seconds today. Also, the thirty year bond
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  Speaker 1: is selling off down seconds, a decline of a little
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  Speaker 1: bit more than half a percent, trading at two point
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  Speaker 1: to nine. All Right, As a global market strategist, what
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  Speaker 1: do you recommend people do with their money? Well, again, um,
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  Speaker 1: you know, it really is a function of tempering expectations.
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  Speaker 1: And we kind of had a little bit of this discussion,
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  Speaker 1: um the last time I was there. You know, really
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  Speaker 1: understanding that risk is part of the equation, That of
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  Speaker 1: volatility is probably something that we need to get used to.
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  Speaker 1: And finding the part of the market that makes sense
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  Speaker 1: for your risk tolerance. Generating the type of returns that
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  Speaker 1: you had from the fixed income market is going to
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  Speaker 1: be challenging. Uh. It certainly requires one to look at
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  Speaker 1: um non sovereign um types of fixed income investments if
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  Speaker 1: you're looking for that type of that type of return.
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  Speaker 1: You know, we've seen really strong returns within the high
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  Speaker 1: yield world. Uh, the investment grades space within the US
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  Speaker 1: and it's you know, for USD investors that kind of
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  Speaker 1: makes UM the currency aspect a little bit easier, continues
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  Speaker 1: to offer spread to to that treasury market, and it
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  Speaker 1: continues to post positive returns in there. So it's that
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  Speaker 1: type of thinking that I believe UM investors need to
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  Speaker 1: to do rather than just simply looking at the government
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  Speaker 1: bond market. So do people have to get used to
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  Speaker 1: relative returns as opposed to absolute returns to a certain extent,
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  Speaker 1: to a certain extent, to a certain extent, and you
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  Speaker 1: know that certainly comes into your retirement planning process and
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  Speaker 1: everything else that goes along with it. UM. When you
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  Speaker 1: do have these sovereign yields anchored at these either very
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  Speaker 1: low and or negative levels around the world, a relative
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  Speaker 1: return is something that UM you have to take into consideration.
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  Speaker 1: Thank you very much for spending time with us and
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  Speaker 1: giving us your thoughts. Marvin Lowe is global market strategist
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  Speaker 1: for b N Y Melan and they can be followed
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  Speaker 1: on Twitter at b N Y Melan. You're listening to
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