NEW YORK (TheStreet) -- TheStreet's Gregg Greenberg spoke to William Irving, portfolio manager at Fidelity Investments, about the FederalReserve and its effect on the fixed-income markets.
Irving said he expects Janet Yellen to have a bigger focus on communication than current Chairman Ben Bernanke did when she is confirmed to succeed him.
Irving said it's the Fed's intention to drive investors out of safe assets and into riskier assets such as stocks. With more investors chasing riskier plays, it will increase the wealth effect, he said, causing more spending and thus an improving economy.
Irving also said the economy cannot sustain significantly higher interest rates, which was apparent earlier this year when rates shot up but failed to hold those levels.
He forecasts that the 10-year Treasury yield, which is currently at 2.7%, could go to 3% in 2014 and no higher than 3.5% in 2015.
Economic growth has generally come on the back of falling interest rates and growing debt, and that is unlikely to change, Irving said.
Regarding investments, he suggested agency mortgage-backed securities are rather expensive, while Treasury inflation protected securities, or TIPS, are fairly priced.
Irving concluded that inflation is below the Fed's current target and is not a risk at this time -- meaning that TIPS investors will have to be patient for their investment to outperform regular Treasuries.
-- Written by Bret Kenwell in Petoskey, Mich.
Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.