For Professional Investors Only. For Information Purposes only. Not Investment Advice.
I have a lot of sympathy with the PIMCO view on US interest rates and bond yields. It's probably not the look that the US Fed wants to show us, but they certainly look and act as if they are beyond the point of no return.
Put another way, more QE is on the way and they (the FED) will most likely keep on going rather than re-consider the merits of QE in principle. Good news for banks who are likely to be able to borrow for nothing for a long while to come. Bad news for the rest of us, as some key elements of inflation (cost of living elements) are likely to pick up. Anyone looking to refinance is also likely to be in for an unpleasant surprise.
Will property prices survive a double-dip or a bathtub-shaped recovery? Sub-optimal growth leads to more empty properties (or more occupants on rent holidays). Empty property is cheaper property simply because as the asset yields less, it must be worth less. So, while low borrowing costs might prevent a flurry of forced sales, the catalysts for any property growth are certainly not in place now. Risks are to the downside.
Meenaz P Mehta
Chief Investment Officer
Axis Investment Management
