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Forward Guidance
Althea Spinozzi on Stagflation, Term Premia, and Ultra Long-Duration Bonds
Nov 3, 2023
49:20
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Discussion on bear market in long-duration treasuries, foreign demand for US Treasuries and complications of hedging, hedging costs and yield curves, the state of US and European economies, and building a barbell portfolio with short and long maturities.
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Quick takeaways
- Investors should consider shorter-term bonds with sizable coupons to benefit from duration while minimizing potential losses.
- Foreign investors, especially Japanese investors, face challenges and negative yields when buying US Treasuries due to high hedging costs and expectations of rising yields in Japan.
Deep dives
Altaya Spinozzi remains bearish on bonds
Altaya Spinozzi, Senior Fixed Income Strategist at SACSO Bank, maintains a bearish outlook on ultra-long maturities in the bond market. She believes the bear market in long-duration treasuries is not over yet, citing factors such as selling pressure and increased treasury issuance. Spinozzi points out that the US Treasury is set to sell a significant amount of 10-year and 30-year notes, similar to levels seen during the COVID pandemic, making it challenging to see a rally in long-term bonds. She advises investors to consider shorter-term bonds with sizable coupons in order to still benefit from duration while minimizing potential losses.
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