Market Vectors’ fixed income portfolio manager Fran Rodilosso today commented on the Federal Reserve’s Federal Open Market Committee’s (“FOMC”) decision to proceed with Quantitative Easing (“QE3”) and the effects that the newly announced plan may have on the fixed income market.
“The FOMC has kept the Central Bank winning streak alive with its announcements today,” said Rodilosso. “Bernanke’s announcement did not exceed the market expectations; in fact, the scope of additional purchases does not include Treasuries as some analysts had expected. However, we are confident that the prospect of low interest rates into mid-2015, which is way beyond the investment horizon of the vast majority of investment managers, may help to sustain demand for risky assets, including high yield debt.”
Rodilosso went on to add, “There are definitely sobering aspects to this story as the very need for this monetary stance is obviously a symptom of a very sick economy, especially in the area of job creation. And it is jobs, rather than the very remote prospects of another housing boom or the wealth effect of rising equity prices, that will get U.S. consumers driving the U.S. economy back to a more acceptable level of growth. But I still see corporate debt, on a global basis, as a relatively attractive alternative to Treasuries, European sovereign debt and even emerging markets hard currency sovereign debt.”
“Yields are indeed low on a historic basis,” he added. “But credit spreads are nowhere near their pre-crisis low and are, in fact, at pretty reasonable levels from an historic perspective given the low default rates the market has been experiencing.”Mr. Rodilosso has more than 20 years of senior level experience in emerging markets, high-yield debt research and portfolio management. He currently manages seven Market Vectors fixed income ETFs, Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL), International High Yield Bond ETF (NYSE Arca: IHY), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Renminbi Bond ETF (NYSE Arca: CHLC) and Investment Grade Floating Rate ETF (NYSE Arca: FLTR). Van Eck Associates Corporation does not provide tax, legal or accounting advice. Investors should discuss their individual circumstances with appropriate professionals before making any decisions. This information should not be construed as sales or marketing material or an offer or solicitation for the purchase or sale of any financial instrument, product or service.