22-05-2025
Global Pushback on Backend of the Curve: PGIM's Peters
00:00
What do you make of these moves to the long end the curve. I don't want to make this too much of a big deal if it doesn't have to be. We have sustained levels around 4 to 5% for quite a number of years now, and the economy has been okay. What does five, 12, five, 13 mean to you on a 30 year? I think it's the direction, right, not the level. And so there is just a push back globally on the back end of the curve. So if you look at what's happening in Europe, you're looking at Japan. Obviously, the US investors are are basically having a time out on the back end. And so consequently you're just seeing that, you know, the 30 year, 20 year yesterday, it really trade heavy just because there's not that investor demand. I think investors concerns are manifesting itself in term premium and kind of wait and see mode in the back end of the curve. And that makes sense to me. Can you help us understand the things we should care about and the things we should ignore? Typically, a 20 year maturity isn't something that investors like anyway, and it's auctions that we don't typically follow. All of a sudden yesterday 20 year auction self demand and everybody cared about it. And I sat there and just thought, if you care about 20 year auctions, you have no place in a bond market. What did you make of what people put on that? Well, so the 20 year definitely is an orphan type of, you know, maturity bucket, but what it says is about the duration. So forget about a 20 year, 30 year. It is adding duration to the portfolio. So that's where the pushback is. And 20 years are trading poorly everywhere as well. So it is an anti duration trade. And what you're seeing in the back and curves globally is that they're behaving like risk assets, not like the typical kind of defensive risk adverse assets. And that just kind of feeds upon itself.
