Morgan Stanley IM: Yields Up, Everything Else Down – How Does it End?
Jim Caron, Co-Lead Global Portfolio Manager and Co-Chief Investment Officer, Global Balanced Risk Control Team, shares his macro thematic views on key market drivers.09.10.2023 | 06:17 Uhr
- The higher move in bond yields is mathematical and logical. In effect, the market was expecting the Fed to project 75 basis points of rate cuts in 2024, but the Fed projected only 50.
- From baseline expectations, this was the functional equivalent of a 25 basis point hike in policy rates at the September FOMC meeting.
- In theory, bond yields should move higher parallel across the curve by 25 basis points - and that’s exactly what happened.
- From an asset price and equity valuation perspective, the 25 basis point rise in the discount factor on cashflows will lower the Present Value, likely leading to lower asset prices.
- So, yields up, everything else down: that’s the way it works. But how does it end? We discuss in this audiocast.
See below for important disclosures.