Still Bullish on Bonds? (w/ Chad Morganlander) | Trade Ideas

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Chad Morganlander of Washington Crossing Advisors returns to Real Vision to update his home-run call on Treasuries from February 2019 (“Bullish on Bonds”). In this interview with Jake Merl, Morganlander highlights slowing global growth, recent Fed commentary, and a handful of macro indicators around what is becoming one of Wall Street’s most popular trades. Filmed on June 5, 2019.

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Still Bullish on Bonds? (w/ Chad Morganlander)
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Transcript:
For the full transcript visit: https://rvtv.io/2ZbsFVE
JAKE MERL: Welcome to Trade Ideas. I’m Jake Merl, sitting down with Chad Morganlander of
Washington Crossing Advisors. Chad, great to have you back on the show.
CHAD MORGANLANDER: Thanks for having me on, Jake.
JAKE MERL: So, you’ve been on the show a couple different times over the past six months. And you were
last here in February with a bullish thesis on bonds. You said the 10-Year Treasury would fall below 225.
You pretty much nailed the downturn over the past few months. Can you please briefly review what macro
factors you were looking at to make that call?
CHAD MORGANLANDER: So, Jake, it was really quite simple. We have a call out that global growth
was going to moderate and in particular, on the emerging markets side. Also, we’d thought that the
developed markets side, in particular, the eurozone was going to continue to struggle and inflation
expectations were going to continue to drop. Also, the third component of this and I think that people are
under appreciating this, Jake, is that yield differentials do matter. And now that you continue to see the
German rates now on a 10-Year at negative 20 basis points, that could continue to be perhaps a
gravitational pull lower.
JAKE MERL: So, what’s your current view of the global economy? Do you think the slowdown is going to
continue?
CHAD MORGANLANDER: Yeah. Look, you don’t need a global recession or a US recession for the 10-
Year bond to go down to 175, or particularly 150. Like I mentioned before, it’s just about yield differentials.
And as well about EM, we continue to believe that you’re going to see a perhaps additional rally within the
bond market where yields go down across the curve overall that could happen in particular in three months
or six months. But also, our intermediate viewpoint, which is a year out is that you’ll continue to see lower
yields overall in the United States.
JAKE MERL: So, we’ve already seen this dramatic move down almost at 2%, would you be entering at
current levels? Or would you be waiting for a pullback to get involved with bonds?
CHAD MORGANLANDER: So, if you do see a pullback of five or 10 basis points or 15 basis points,
we would add to our existing positions. If you’re new to the to the trade, we would perhaps sold off. One
of the startling things that is happening here is that you’re not really seeing a tremendous amount of financial
stress within the system right now. You’re not seeing credit spreads gap higher or disorderly CLO market
or equities really plunge? This is all happening based off of we believe this perception that inflation and
credit growth on the EM side, China will just moderate or actually decelerate rapidly.

Comments

Playonstereo says:

Nowaday EEM is rising and it will rise during next months.

Stream of Thought says:

when the fed goes back to QE how will that be bullish for the dollar?

honestabe says:

Love the specificity…

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