BlackRock's Stattman: 'We Don't Like the Bond Market'

Thursday, 17 Jul 2014 07:59 AM

By Dan Weil

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Bonds have registered an unexpectedly solid performance so far this year, with the Barclays U.S. Aggregate bond index returning 3.7 percent during the period.

But officials at BlackRock apparently don't expect that kind of performance to continue.

"We don't like the bond market," Dennis Stattman, manager of the firm's Global Allocation Fund, told CNBC.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

The fund's allocation weightings are 58 percent for stocks, 23 percent for bonds and 19 percent for cash.

"Coupons in the bond market are simply not adequate to meet our investors' return needs," Stattman explained.

"And spreads, to take credit risks, are skinny also," he added. "While we see a few select opportunities in the world's bond markets, principally outside the U.S., the fact is we just need to be underweight bonds today."

The 10-year Treasury yield stood at 2.51 percent early Thursday, hitting an almost-six-week low earlier in the week. Also earlier in the week, junk bond yields topped Treasury yields by only 357 basis points, a seven-year low.

Meanwhile, bond market participants were comforted by Federal Reserve Chair Janet Yellen's congressional testimony Tuesday, in which she indicated the central bank is in no hurry to raise interest rates.

"It's reassuring to the financial markets that the Fed will not be doing anything too quickly to disrupt the economy," Gary Pollack, head of fixed-income trading at Deutsche Bank's Private Wealth Management unit, told Bloomberg.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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