BondBloxx COO Expects Rates To Be Higher For Longer

We also just a few moments ago got some headlines from Fed Governor Lisa Cook saying that there is a rate cut warranted and it will be appropriate to reduce interest rates. But at some point that's a direct quote. She added that she expects inflation to improve gradually this year before more rapid progress in 2025. So let's discuss this more now. I'm joined by Bond Blocks Co founder and CEO Joanna Gallegos. Thank you so much for joining. Anything new in these Governor Lisa Cook comments? I don't think there's anything new. I think June and a few weeks ago, we heard some surprising news from the Fed in terms of the way they've reduced their outlooks for both rate cuts this year, going from 3:00 to 1:00 and also their their approach for the neutral rate in the future. So I think what she's saying is largely aligned with that. You know, it's been 8 consecutive meetings where they've kept rates steady. And even though June was notable, we did just come off of before June, you know, 33 or so months of data that told us that inflation was slightly rising. So we need more to see what's next for the summer before we can conclude anything major with the right strategy. If rates are coming down, we know they are. And we know as Governor Cook says, it's going to be at some point, which maybe isn't that helpful, But is the right strategy just to hold on to what you got right now? It can be definitely on the shorter end of treasuries. I think that you want to ride along with stable rates. I mean at Bond Blocks we do feel that rates are going to be higher for longer even if there is a cut in 2024. We're not expecting deep cuts or multiple cuts in 2024. So you know on riding along with stable rates and higher for longer means you can be, you know, on the short side earning 5% in treasuries right now. But what we think is more interesting and compelling is to take a look and remind everyone has this story every day. Growth has been resilient and company fundamentals have been resilient over six quarters over two years since 2022. So really the backdrop of this for corporations means they're able to cover their interest rate ratios, they're they are able to you know, support their bonds. So we like people thinking about higher spread products, even into high yield and corporate debt. We heard Saba Capitalist pause Weinstein talking about volatility and how it was, you know, crazy low during the Trump era. And just recently we've had some volatility in the bond market. Not the last few days. It's been exceedingly quiet the last few days. But the move index has been way outperforming, let's say, the VIX for a long time. Do you see that continuing or do we know now? Have we more of a signpost of what the bond market is going to do? Yeah. Even despite the rally from the last few weeks, you know, year to date, most sectors in fixed income are going to under perform a bit. So that would be on the long dated treasuries, long dated corporates even in the Barclays AG. So I think there's more to more to come here. I don't think that means that we're going to see a lot of rebound because we haven't really seen and we're expecting more of a softer landing towards the end of the year in the economy. And if that happens, we know as we bomb blocks believe the the rates are going to be higher for longer and you will see some moderate growth, but you won't be a runaway rally.