U.S. Rates: Low for Long, but Likely Positive

PGIM Fixed Income

August 2019

Nathan Sheets, PhD, Managing Director, Chief Economist, Head of Macroeconomic Research; Robert Tipp, CFA, Managing Director, Chief Investment Strategist, Head of Global Bonds; and Richard Piccirillo Managing Director, Senior Portfolio Manager, Multi-Sector

The burgeoning stock of negative-yielding debt across the international markets has investors wondering: will it happen in the U.S. too? Given our long-standing “low for long” thesis for the global bond markets, we expect U.S. rates to fluctuate around current levels and ultimately remain positive given some key distinctions between the U.S. and the growing list of negative-yielding countries. Our assessment starts at the front-end of the curve and whether the Federal Reserve could resort to a nominally negative Fed funds rate. We then look at factors affecting longer-term rates.