{"id":10632,"date":"2023-11-07T13:33:20","date_gmt":"2023-11-07T13:33:20","guid":{"rendered":"https:\/\/infundpros.com\/markets\/fed-likely-to-cut-rates-below-3-making-bonds-attractive-now-guggenheim-says\/"},"modified":"2023-11-07T13:33:21","modified_gmt":"2023-11-07T13:33:21","slug":"fed-likely-to-cut-rates-below-3-making-bonds-attractive-now-guggenheim-says","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=10632","title":{"rendered":"Fed likely to cut rates below 3%, making bonds attractive now, Guggenheim says"},"content":{"rendered":"
\n

Guggenheim Investments thinks investors should look past the carnage in bonds and gear up for the Federal Reserve to pivot to rate cuts. <\/p>\n

While the investment team expects the Fed to leave its policy rate unchanged at a 22-year high of 5.25% to 5.5% over the next several meetings, they also see a recession as likely in the first half of 2024.<\/p>\n

\n

That backdrop could spark a quick Fed pivot \u201cto rate cuts, ultimately cutting rates by around 150 basis points next year and more in 2025,\u201d said Matt Bush, U.S. economist at Guggenheim, in a client podcast published Monday.<\/p>\n

\u201cWe have them taking the fed funds rate down a bit below 3% and pausing balance-sheet runoff in what we think will be a recession, albeit a mild one,\u201d Bush said.<\/p>\n

Fed Chairman Jerome Powell last week signaled that the sharp rise in longer-duration Treasury securities recently might be doing some of the central bank\u2019s inflation fighting for it, sparking hopes that there might not be a need for additional rate hikes in this cycle.<\/p>\n

In a twist, however, the 10-year Treasury yield
\n BX:TMUBMUSD10Y
\n fell sharply last week from a recent peak of 5%, before rebounding on Monday, mimicking earlier volatility in the $26 trillion Treasury market that has kept the Fed and investors on their toes in 2023. <\/p>\n

With that backdrop, the team likes agency mortgage-backed securities returning roughly 6%, structured credit kicking off about 8% to 9% on A-rated debt and segments of BB-rated high-yield offering about 9%, all higher-quality parts of credit markets.<\/p>\n

\u201cWe\u2019re frankly not getting paid enough to reach further down the capital structure,\u201d said Adam Bloch, a portfolio manager with Guggenheim\u2019s total return team, adding that they are keeping 20%-30% in \u201cdry powder\u201d across most of their strategies to take advantage of any stress ahead.<\/p>\n

Parent company Guggenheim Partners has about $218 billion in assets across fixed-income, equity and alternative strategies.<\/p>\n

\u201cIt\u2019s obviously been very painful to get to the point where we are today in fixed-income markets and across the yield spectrum,\u201d Block said, while adding that \u201cIt\u2019s kind of like the famer who stumbles upon a burned-out forest after a wildfire, and all he sees is farmable land.\u201d<\/p>\n

\u201cWe\u2019re focused on, again, locking in these record-high current yields, and we broadly think that\u2019s what investors should be doing, too.\u201d<\/p>\n

The stock market rallied for a sixth straight session on Monday, with the Dow Jones Industrial Average
\n DJIA
\n and the S&P 500
\n SPX
\n booking their longest streak of gains since June and July, while the Nasdaq Composite
\n COMP
\n scored its seventh consecutive day of gains. <\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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