Bryce Doty is notification that an unusual bond market trend could catch Barricade Street by surprise.
The SIT Investment Associates senior portfolio manager notices the yield curve inverting faster than anticipated.
“You have these unprecedented issues — the amount of bonds being issued by the Treasury in this concentrated, shy of part of the curve. At the same time, there is an unprecedented, unwinding of this whopping balance sheet,” Doty said Tuesday on CNBC’s “Futures Now.” “Those intricate issues are all creating a perfect storm for yield-curve inversion.”
Inverted cry quits curves, when yields on short-term bonds exceed those of long-term notes, are historically ignited by economic troubles. But this time is different, according to Doty.
“Mostly, it is the outlook for the economy that starts to sour, and that’s what calls traders and investors to drive yields down in anticipation that the Fed at some place is going to need to cut rates,” he said. “What is happening now is an inversion bring oned by these technical factors that we’ve never had before.”
Inverted yield curves are deleterious because they damage lending and credit.
“Normally, a yield curve inversion is unusually bad for the economy,” said Doty, who runs the firm’s RISE ETF, which is designed to profit from goad rates.
His latest thoughts came as the Federal Reserve began its two-day confluence on interest rates. Even though an interest rate hike isn’t keep in viewed Wednesday, Doty suggests vigilance.
“The Fed is going to reiterate their credence that the economy is very strong, indicating at least two more reckon increases this year and probably two to four next year,” Doty said. “That’s accepted to continue to drive up yields on the short end.”