00:00So I started trading tips back in 2001, sort of at the advent of the market, and on a liquidity
00:05adjusted basis. So there have been times in 2008, for example, when real yields were higher. But if
00:11you look at the level of 30-year real rates right now, on a liquidity adjusted basis, we've never
00:15seen these attractive levels. And frankly, our clients are taking note of it. The amount of
00:20inflows that have come in into products like TIP and STIP, which give you access to that
00:26real yield, has picked up more recently. And this is a global phenomenon, not just a U.S.
00:31phenomenon. So I'm talking to investors outside of the U.S. who are looking at this very
00:36advantageous real rate above 3 percent levels. And I'll also say it's the same for intermediate
00:42ag treasury products. Investors are looking at over 5 percent or near 5 percent in the 10-plus sector
00:49sector and are feeling very good about the carry that they will earn in those products
00:55so that it protects you, even in the case of rates going up ever so slightly, because you
01:00have that cushion now. Rates can move up a little bit, and you'll still make some money
01:04because your coupon is going to protect you for that move in rates.
01:08The cushion is really the most important thing. And this is a very different environment.
01:12And we talk to clients. They're worried about rising interest rates. But you have to go back.
01:16You know, in 2020, the U.S. ag was yielding around 1 percent. You could tolerate maybe 15
01:22basis points of wiggle room with respect to yield, and you would have a negative return.
01:27Today, you have to see the ag's yields move as much as 80 basis points higher before you get to
01:32that break even level. So you pile on where real yields are. This is a very enduring environment for
01:38folks that are looking to take advantage of very attractive income across the high-quality bond market,
01:43or even when you look into the credit market as well. So there's a lot of opportunity here
01:48for income investors, given this jump in rates.
Comments