How Wall Street is playing fixed income in the second half of the year

[Pelican Press 0]

How Wall Street is playing fixed income in the second half of the year

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. “That said, the shallow path for rate cuts driven by normalizing growth and inflation suggests investors may be best suited embracing a barbell approach by generating still attractive yields at the front end, while owning some duration as a portfolio hedge,” the team wrote. Meanwhile, Wells Fargo is advocating that investors prioritize credit quality as the yield curve stays inverted over the next 6 to 18 months. “If this whole story in some ways ends somewhat with more economic pain before the Fed comes to the rescue, you want to be up in quality in your portfolio,” explained Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. Right now, Wells Fargo prefers municipal bonds and securitized products, such as residential mortgage-backed securities . It finds high-quality residential MBS, including agency- and non-agency mortgages, attractive because of their relative value compared to investment-grade corporates. Meanwhile, muni bonds are a good investment for those in the highest tax bracket since they are free of federal taxes, Samana said. “Given all the talk about deficits and fiscal responsibility you could possibly see a scenario where at some point tax rates have to go up for more fiscal discipline,” he said, adding that it won’t happen anytime soon. Within munis, Wells Fargo likes state and local general obligation and essential service revenue.

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Mortgage-Backed Securities,Municipal bonds,Corporate bonds,Mortgages,Investment strategy,Stock markets,Bonds,U.S. 10 Year Treasury,Charles Schwab Corp,Prices,business news
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