With a debt ceiling agreement alleviating macro-level concerns, the consequences of avoiding default could pose new challenges for swap fund investors.
Howard Lutnick, President and CEO of BGC Partners, told CNBC: “The rate is already lower than you think in the Treasury market. Bob Pisani ABOVE “next to ETF” on Wednesday.
“Currently [The Fed] will hit it with trillions of dollars in revenue that will drive up short-term Treasury yields,” he said. “And that’s going to look like a rate hike.”
Lutnick explained that stress from the Fed sell-off would encourage the central bank to pause another rate hike. In addition, trillions of dollars being pulled out of the regional banking system and put into money market funds have added pressure on large and systemic banks, he said, increasing the tie. of the Fed.
“Fed doesn’t raise [rates]Don’t buy it,” Lutnick said. “They don’t raise it.”
While the impact is positive for investors worried about additional rate hikes, raising the debt ceiling next year could accelerate global liquidity depletion.
“Low interest rates push people to take risks [and] go buy stocks,” Lutnick said. “Now you have someone saying, ‘Hey, maybe I should put my money in the Treasury. I get 5% risk free.’ And that’s money flowing out of the stock market.”
As money market yields continue to rise, Lutnick said he sees capital continue to flow out of stocks and into money market funds and Treasury bond ETFs.
“You will see the stock market move sideways, but the bond market will continue to suck money and have a lot of power,” Lutnick said.
But as investors prepare for an influx of Treasuries to enter the market, Tradeweb CEO Billy Hult stresses the importance of finding liquidity in the market to understand the government bond market. how it is working.
“The most sophisticated players who live and breathe in my space are all about creating ETF technology around liquidity,” said Hult. “That market is particularly solid.”
Hult explains that incorporating greater transparency, price efficiency, and technology into fixed-income funds has helped drive the growth of the bond market. In turn, he said, investor interest in bonds and Treasuries will eventually be expressed through ETFs.
“That’s not going to change,” Hult said. It’s an easier way to make a point.”
