UBS On-Air: Market Moves
Top of the Morning: Fixed Income Strategist - Looking for high yield
Oct 17, 2023
Leslie Falconio and Alina Golant discuss the outlook for long-term treasury yields, Fed policy meeting, opportunity set for high yield, and overall positioning recommendations within fixed income. They explore factors contributing to rate hikes, performance of the high yield market, and views on allocation within the fixed income asset class.
21:55
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Quick takeaways
- The recent rise in treasury yields is attributed to the resiliency of the consumer and corporations, the shift in sentiment by the Federal Reserve, and other factors such as quantitative tightening, supply of treasury bonds, and liquidity issues in the treasury market.
- The high yield market has been supported by strong economic performance, robust fundamental factors, and technical factors like low new issuance volumes and rising stars; however, concerns exist regarding potential economic slowing and weakening credit metrics in the future.
Deep dives
Factors contributing to the rise in treasury yields
The recent sharp rise in treasury yields can be attributed to several factors. First, the resiliency of the consumer and corporations in terms of earnings has boosted the economy and led to higher interest rates. Additionally, the shift in sentiment by the Federal Reserve and their projection of a smaller rate cut in 2024 has repositioned market expectations. Other factors include quantitative tightening, supply of treasury bonds, and liquidity issues in the treasury market.
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