UBS AM’s Zhao Says Fed Rate Hikes Will Widen Treasury Spreads

The Federal Reserve will have to switch to raising interest rates next year because of a pick up in growth, which will cause a dramatic widening in Treasury yield spreads, according to Kevin Zhao of UBS Asset Management.

“If you have growth going up, unemployment going down, and inflation staying high, I think the justification for rate hikes will become evident by the middle of next year,” said Zhao, who leads the Swiss firm’s actively managed sovereign, fixed income and currency funds.