HALISTER1: Negative Real Rates Will Persist Next Year: Allianz’s Bredemus

Negative Real Rates Will Persist Next Year: Allianz’s Bredemus

(Bloomberg) -- Real rates will move up slightly from current levels but “not enough for us to move to a short position,” John Bredemus, Minneapolis-based vice president at Allianz Investment Management, which oversees more than $700b, said in a phone interview.
  • “Underlying issues haven’t changed a lot around lower growth potential,” which should keep real rates negative through end-2017
  • Portfolio mainly IG credit, not much duration risk; overweight credit, underweight USTs and MBS
  • Sees UST 10Y yield between 2.5%-3% for end-2017; expects 2-3 Fed rate hikes in 2017
  • Sees inflation moving “a little higher” given expectations of fiscal stimulus and infrastructure spending; Fed “won’t have any issue at all” if inflation slightly overshoots 2% target
  • Regarding FX, Bredemus said, “We don’t think the dollar will appreciate too much more from here”
    • “Surprised” to see EUR/USD break through lower end of 1.05-1.15 range; doesn’t see pair going to parity
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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John Bredemus (Allianz SE)

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