In the US, growth and inflation expectations with additional Government stimulus will increase demand on goods and services, while rising rates and positive rate expectations are making the yield on new bonds more attractive.
While participation in last Friday’s US Government bond auction was at record lows, the impact on other bonds will depend on their sensitivity, and typically their rating as investment grade / high yield.
For investment managers allocation to rate sensitive bonds can be problematic, as can passive strategies or restrictive mandates which limit the responsiveness of a portfolio manager. Jeff Rosencranz, fixed income portfolio manager at Shelton Capital Management outlines his approach to managing these risks.
