BlackRock Sees No Way to Make Money in Sovereign Debt: Tom Keene

Government debt offers fewer prospects for investors than equities, according to Ewen Cameron Watt, chief investment strategist of the BlackRock Investment Institute, the research unit of BlackRock Inc.

“In the government stuff, there’s just really no opportunity to make money,” Cameron-Watt said in an interview on Bloomberg Television’s “Surveillance” with Tom Keene and Sara Eisen. “If you look at the bond market, it is just one big interest-rate bet right now.”

Yields on government bonds in the U.S. and Germany have fallen toward all-time lows in the past month amid speculation central banks around the world will maintain stimulus measures and put downward pressure on interest rates. The Standard & Poor’s 500 Index of U.S. stocks closed at an all-time high on April 2.

Ten-year Treasury yields rose three basis points, or 0.03 percentage point, to 1.78 percent as of 8:57 a.m. New York time, down from as much as 2.08 percent a month ago, and compared with a record-low level of 1.38 percent reached last year. The rate on similar-maturity German bonds rose four basis points to 1.30 percent, compared with 1.54 percent on March 8. The all-time low German bund yield is 1.13 percent.

The Bank of Japan said on April 4 it plans to buy 7.5 trillion yen ($76 billion) of bonds a month. European Central President Mario Draghi said last week monetary policy “will remain accommodative for as long as needed,” while the Federal Reserve is buying $85 billion of securities a month in a bid to boost growth and reduce unemployment.

U.S. government securities returned 0.4 percent this year and German bonds rose 0.7 percent, according to Bank of America Merrill Lynch indexes. The MSCI World Index of global stocks returned 8.4 percent, including reinvested dividends, since the start of the year, according to data compiled by Bloomberg.

“The duration opportunity, the opportunity to make money over the long-term, lies with equities,” Cameron-Watt said. “This is still a pretty low-growth world, but it is not a train smash.”