Fidelity manager hasn't been this excited by bonds in five years

At current levels, the market has already priced in three more Fed rate hikes, Jeff Moore argues.
MAY 07, 2018

Fidelity Investments fund manager Jeff Moore hasn't been this excited about the bond market in a long time. The sell-off in U.S. and Canadian bonds has raised yields due within 10 years to levels at which investors can finally get decent returns, according to Mr. Moore, who co-manages more than $50 billion in Canadian and U.S. fixed income for Fidelity. "I'm actually more excited going forward than I was in the last five years," Mr. Moore said in a phone interview from Merrimack, N.H. (More: Loomis Sayles' star bond manager talks about rising rates and trade wars) Yields on 10-year Treasuries briefly broke above 3% last month for the first time since 2014, and prominent investors like Paul Tudor Jones and Ray Dalio said a full-on bear market is all but inevitable. In Canada, yields on two-year and five-year government debt have reached the highest level since 2011. Yet Mr. Moore argues that the market has already priced in three more hikes from the Federal Reserve over the coming year and two from the Bank of Canada. For yields to go up further and cut the value of bonds even more, the central banks would have to move faster than that. He thinks that's unlikely. "I don't feel like they have to jawbone the market higher," he said. "If anything, they feel more like price takers, they're comfortable to raise rates if the market is going to price it in first." Both the Fed and the BOC can let inflation run slightly above target as the central banks remain wary of changes in trade policies, which may affect currency rates. Mr. Moore sees credit as fairly valued and favors U.S. banks and industrials because they are the biggest beneficiaries of corporate tax cuts and other business-friendly measures adopted by the U.S. administration.https://www.investmentnews.com/wp-content/uploads/assets/graphics src="/wp-content/uploads2018/05/CI11540757.PNG"

(More: What advisers should tell clients about the inverted yield curve)

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