The Hunt for High Yielding Equities

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July 2 (Bloomberg) -- Aegis Chief Investment Officer Stanley Crouch and GMP Securities Director of Fixed Income Strategy Adrian Miller discuss fixed income and Federal Reserve monetary policy with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)

It adrienne, when people open their statements this month and a look at the fixed income portion of the portfolio, give them some guidance.

How are they supposed to react at the possibility that the value of the bonds in the portfolio have fallen?

Don't open the statement.

Wait until september?

Yes, we until september.

-- wait until september.

It was partly due to the bond market being overbought at the end of april.

That resulted in a slingshot effect with the fed tapirs care where you had an oversold condition -- with the fed taper scare or euratom oversold condition in the bond market.

We think economic growth, where it is going and with inflation expectations and a possible tapering in queue for, we see the fed engaged in monetary policy.

We see about 2.35 on the 10- year.

We are at about 2.49 right now.

Yes, and the market is going to be fairly edgy and uncertain leading into the september meeting.

That is where you'll see some kind of tapered.

Stanley crouch, which you buy this idea?

Would you like to buy some slightly used treasury bonds at two 0.5% for 10 years?

Yes, and now.

-- yes and no.

I think there is still market -- pressure in the market on the chinese side.

The chinese have their own accord the issues, so we could see more of that.

But i worry more about the spread and then the entire rest of the debt complex.

There are many things that are related.

There are esoteric type of structure projects.

By the -- but people are reaching for yield, right?

We got a historically narrow progression in those trades and everything got very compressed already in those rates.

If you get two things that are very detrimental, a widening spread of quality or a perception of quality together with a nominal treasuries falling, that is a double with me.

And bond investors generally believe they have some sort of stability in bonds, even though prices can vary.

They want bonds to act like a money-market fund.

That is, if they actually owned the bond directly as opposed to an existential duration.

Exactly, and because e.t.f.'s are in fashion, they have created enhance the liquidity to some extent, but they will not necessarily behave like you would.

-- like you would when you've got that.

And exchange traded fund is supposed to make various bond indexes.

When they're working, great, nobody worries.

But when you have any change in liquidity, and the inability for people to get in and out of the exchange traded funds, then they will no clear the these are not bonds, but proxy's for bonds.

And the the thing you have to remember with e.t.f.'s, especially in the corporate sector, it has been commandeered by these institutional investors who use the product as a hedge vehicle.

It has become less of a mom-and- pop type of investment vehicle.

Take, for instance, a high- yield vehicle, those are top- down large liquid issues.

It is not the retail business.

There are different dynamics going on for the last year and change that have created volatility in these markets.

Please keep us up-to-date.

This text has been automatically generated. It may not be 100% accurate.


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