Goldman's Rosner: No Need to Go Into the 30-Year Bond

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Transcript

00:00Let's talk about fixed income, the kind of risks out there. Lots of people worried about the long

00:03bond, the 30-year issue. Yes, and that has been trading more like risk asset than it has been

00:08trading as a flight to quality, which I think we're used to. The big thing here is just trying

00:13to figure out where fiscal is on the going forward. And what we've been telling clients is there's no

00:17need to go into the 30-year bond. There are a lot of bonds in the belly and the very short end of

00:21the curve. Stay there and you'll be better served. If you're worried about risk in treasuries,

00:25does it upend how we perceive risk elsewhere in corporate credit? Absolutely, because treasuries

00:30are the base, which is what we then build everything off of. It's the risk premium above it that gets us

00:36to where spread risk is valued. So what we're seeing in the back end actually influences our views on

00:41back end investment grade corporates, for example. And as a result of what's happening in the back

00:46end of the rates curve, we've actually also stayed in the front end of the corporate curve and stayed

00:50away from the back end of the corporate curve. Jeff Gunlock yesterday talking to Lisa. John's

00:55been talking to a lot about these comments, but he says it's certainly behaving differently than it

00:58was for the last four decades. Things are behaving differently. He's talking about how he won't touch

01:02the 30-year treasury. Why do you think this is so different than what we've seen with skirmishes

01:09in the last four decades? Yeah, I do disagree a bit in that this isn't something we've never seen

01:15before. Questioning fiscal, questioning the fiscal sustainability or unsustainability of

01:22the government is not anything new. And it has been a concern. What's different is the problem's

01:27gotten larger and larger and larger. And I think we're getting pretty close to a breaking point.

01:31And that's what the back end of the curve is telling you. That being said, there's always a

01:36right price for something. And I think we're getting fairly close in the back end to an area where it

01:42seems interesting. And certainly we've bounced off today. Yields are lower on the back of the economic

01:47data that we got that were surprising. But there will be a point in time where the 30-year is

01:52something that you want to own because we're putting in some real, real yield in the back end.