Portfolio Management Investbank Morgan Stanley Jim Caron, responsible for fixed return tools, in an interview with CNBC called to believe in the US economy.
Camon commented on the growth rate of 10-year-old American treasury bonds, which traditionally serve as a landmark for the level of rates on the dollar market. In mid-March, it reached 1.7 percent, which became the highest indicator over the past year. The profitability of papers with a maturity of 30 years has also increased and amounted to 2.4 percent.
This happened contrary to the assurances of the leadership of the Federal Reserve System (Fed) that in the foreseeable future, the regulator is not going to raise a bet on federal funds (base rate) or terminate the quantitative mitigation program (QE) for the purchase of state, corporate and mortgage banks bonds.
The opposite would mean the growth of rates on the market as a whole and would give investors incentive to sell 10-year-old paper, which would lead to a decrease in value and, as a result, to the increase in profitability. Thus, the US government bonds can be regarded as contrary to the basic principles of the economy.
According to Caron, such behavior of investors was expected and may indicate that. What investors overlook bonds and prefer to invest in stocks, especially against the background of data on a faster compared to the expectations of the economy. So, the Fed expects 6.5 percent GDP growth in the year instead of 4.2 percent.
The American economy demonstrates confidence as the number of vaccinated residents of the country is growing and restrictions imposed to combat the proliferation of coronavirus are removed, Karon believes.