Where The Next Big Bond Trade Is Hiding | Harley Bassman – Forward Guidance

Where The Next Big Bond Trade Is Hiding | Harley Bassman – Forward Guidance — Transcript

Market views

Bullish

MBS— Mortgage-backed securities (MBS) are attractive due to their zero credit risk, despite having callable and prepayment risks. They are considered safer compared to corporate bonds, especially in potential economic downturns.
EQUITIES— Equities are expected to perform well in a scenario of increasing nominal GDP, which is part of a broader strategy to reduce debt-to-GDP ratio. While there might be some lag due to PE compression, the overall trend is expected to be positive.

Bearish

CORPBOND— Corporate bonds are considered risky in a potential hard landing or crash scenario. Lower earnings in such situations could lead to defaults and wider spreads, making corporate bonds a less attractive investment.
VOL— Implied volatility for bonds is considered too high compared to realized volatility. This presents an opportunity to sell convexity and optionality on interest rate products that take duration risk or credit risk.

Not investment advice.