Bond Market Observations: Conviction and the Courage that Comes with Coupon
Authors and Contributors
Active Fixed Income-Investment Committee
Maintaining the courage of your convictions seems easier to read about in poetry (think of those mainstays of the Victorian era, “If” and “Invictus”) than to live with as an asset manager. We believe a simple narrative plays out within our investment horizon. We position accordingly, but we protect ourselves from being too wrong. The global economy continues to expand in 2018, with the growth of advanced economies mostly in sync and faster than that of their potential to produce. This puts pressure on costs and sends inflation higher, toward the inflation goals of two of the Big Three—the Bank of Japan and the European Central Bank (ECB)— and over that of the biggest—the Federal Reserve (Fed). We think an overachieving Fed tightens three more times this year and may talk into markets plans for higher rates. Even now, the median Fed official thinks that the policy rate will outstrip its long-run level— as do we, even more so.
On January 31, 2018, The Boston Company and Standish merged into Mellon Capital to form a combined entity, BNY Mellon Asset Management North America Corporation. Effective January 2, 2019, this entity was renamed Mellon Investments Corporation.