Wise: Short-Term Treasurys Top Pick as Fed Holds Rates
SkimNews Take
Front-end exposure implicitly wagers against a near-term pivot, rewarding holders if the market's additional-hike expectations prove right while forgoing the steeper rally in long-duration if the Fed unexpectedly cuts.
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- Noah Wise, head of global macro strategy and senior portfolio manager at Allspring Global Investments, recommends overweighting short-term Treasurys over long-duration bonds as part of a diversified portfolio ahead of Wednesday's Fed decision.
- Wise told CNBC's "ETF Edge" that yields north of 4% with relatively low risk look attractive, noting the market is pricing in a couple of Fed hikes over the next couple of years.
- Wise said Allspring prefers U.S. credit — both investment grade and high yield — over European credit, citing strong macro fundamentals as the differentiator.
- Wise singled out Latin American emerging markets as a standout opportunity, where yields are in double digits and "you can still generate pretty attractive yield and income in a really diversified manner" despite geopolitical risks.
- In a special note to CNBC, Wise wrote that the Federal Reserve's decision this week to leave rates unchanged has not changed his investment strategy, and that Allspring's strategies "have been tactically adjusting" exposure to the short end to capture volatility between meetings.
Why it matters: The short-end of the Treasury curve now offers yields above 4% that Wise characterizes as relatively low risk — a rare combination, especially attractive if the Fed delivers the two hikes markets are pricing in over the next two years. Allspring's tilt toward U.S. credit over European and its Latin America EM bet show where one large fixed-income shop sees relative value ahead of further Fed decisions.
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