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Wealth Manager Retreat: George Magnus - now is not time to short bonds
by Elsa Buchanan on Oct 17, 2013 at 14:17
Respected economist and author George Magnus offered a fascinating insight into markets at our annual Wealth Manager Retreat held at the Grove in Hertfordshire.
Magnus, who is widely credited with having identified the triggers which ultimately led to the financial crisis, highlighted the dangers of being short of bonds in the current climate where the asset class finds itself firmly out of favour.
Magnus said the bond yield curve would only reach dramatic levels if markets ‘suspected a sovereign crisis or expected interest rates to go up’.
‘Bonds are in a tricky position now, and people think the party is over because of the nature of the long mature rally. But it’s not the time to short the asset class.'
The consultant, who does not anticipate a rise in interest rates in the foreseeable future, expects government bond markets to remain cold to Janet Yellen’s imminent appointment as chairman of the Federal Reserve.
‘Yellen will make sure that policy rates will not rise for a substantial length of time,’ he said.
Finally, Magnus cited the regulatory backdrop as a hindrance to higher yields: ‘When you have regulation that says you should hold a certain amount of that asset class and low policy rates, I really don’t want to be mega short of the asset class.’
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on Dec 06, 2013 at 14:28