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Spotlight

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

Nathan Sheets, PhD, Managing Director, Chief Economist, Head of Macro 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.

Argentina: 5 Key Questions

Cathy Hepworth, CFA, Co-Head of the Emerging Markets Debt Team and Francisco Campos-Ortiz, PhD, Latin America Economist, Macroeconomic Research Team

The unexpected and shocking defeat of President Macri and his center-right party in the Argentine primaries on August 11 has led to a significant repricing of Argentina assets. In addition to providing revised macro forecasts given our base case that the Fernandez ticket wins the October election, we provide perspective on 5 key questions regarding how events may unfold in Argentina going forward.

Recent Thought Leadership

Turkey—A Short-Term Reprieve Amidst Persistent Uncertainties

Jürgen Odenius, PhD, Principal, Economic Counsellor, Global Macroeconomic Research Team, and James Hyde, Principal, Credit Analyst, European Corporate Bond Research Team

Turkey’s economic crisis erupted one year ago, and we recently returned to the country to gauge the outlook going forward. While Turkey’s large external financing requirements remain its key vulnerability, funding flows should continue normalizing. In this context, it is noteworthy that political uncertainty appears to have “troughed.” Growth apparently remains the overarching priority of economic policy, and any policy missteps risk draining the rather limited (unencumbered) official FX reserves. However, in such a scenario, the authorities could turn to the IMF as a last resort. On balance, we remain cautiously constructive on Turkey’s outlook.

 

The Fed's About-Face Complete Amid Dissent

Ellen Gaske, PhD, CFA, Principal and Lead Economist, G10 Economies, Global Macroeconomic Research Team, and Robert Tipp, CFA, Managing Director, Chief Investment Strategist and Head of Global Bonds

The markets were disappointed with the Fed’s 25 bp cut. Short-term yields rose amid reduced expectations for cuts. However, long rates declined, suggesting that the less-dovish-than-expected Fed could dampen inflation and growth over the long run.

Weekly View: Views on Jackson Hole, DM Rate Developments

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