Hilltop's Grant Advises Looking At Closed-End Bond Funds(Audio)

of things, Let's give him credit now. First of all, he said no, they will vote to leave. And second of all, he's been looking for a continued rally in treasures that could take the yield on the US tenure note down to one and a half percent, maybe even one in a quarter. And we did see that tenure touch about one point five at the lowest yield higher price of the day. Let's welcome back to the show now, Mark Grant, chief fixed income strategists at Hilltop Securities, joining

us from Fort Lauderdale, Florida. So Mark, congrats, hats off. I guess he's overcome with my praise. Mark Grant, so or maybe I think we've just got a little bit. I think he fainted. PM I, well, maybe because he's taken a look at the yield on the tenure at one point five five percent. I mean, this was an increase just today of more than one and a half percent in the value of the ten here and the thirty year a gain of more than five and a half percent in value two point four one percent for

the thirty year US Treasury Mark Grant. Did you hear me praising you up one side and down the other? And I was turning red and I couldn't speak. Okay, all right, so so you called it right. That's great. Beyond that, though, what happens now, I mean, are they Are they the Brits gonna wake up tomorrow morning and say, hey, what the heck did we do? I wanted to express my protest, but I never thought the vote would go

through because of me. Take it back, please, No, that's garbage coming out of Brussels that they want to try to get them to vote again. It's it's not they voted, they voted. It's done, all right, they voted, they voted, it's done. Give us your analysis of what the future of the UK economy looks like I think they're going to go through a couple of months of difficulty. The most difficult part will be when they invote Article fifty. I think that and I've been very square about this.

You know, the the offices for the European Union or in Brussels, but they make the decisions in Berlin, and I think there's going to be a tremendous amount of vengeance, retribution. And now I think there's also going to be more talk of referendums in other countries such as the Netherlands and even France with the Marine le Pin. And of course we have the Spanish election on Sunday, which I think will be very interesting as a result of the

British vote. So, Mark, why do you say there's going to be retribution and it's sort of a harsh stance now towards the EU? Why not uh, something that maybe in public talks tough, but a little bit more, you know, behind the scenes, says hey, you know, this is really not the best thing for you or for us, maybe

we can work this out. Well, they've voted to leave, and you have a European construct that is questionable, has been questionable since the beginning, because you know the look, you have the southern nations Spain, Italy, Greece and so forth, Portugal, and you have the Netherlands in Germany and Austria, and there are two very different cultures. I'm not saying right or wrong, bad or good, they're just very different cultures. And they've tried to meld all this together. And finally

you add one country that said, that's enough. We want to be governed by ourselves. We don't want you governing us anymore. And I think, and from what I can tell in speaking with a number of institutions today, including some huge ones in Europe, people just said, we don't want to be governed out of Brussels in Berlin. We want to run our own country. And I think that's certainly as an American, that's certainly the way I would feel.

So um, I think now they're going to be frightened that the whole European Union might come apart, and the first action is going to be some kind of vengeance against the Britain to keep everybody else in. But we'll see. Mark Grant, turn your attention to the Federal reserve interest rate policy here in the United States, when and if they raise rates, give us your analysis them. As you know, all year, I've said they're not going to raise rates anymore.

I have said it continuously. I don't think that they can, and especially after this and the difficulties this may cause some banks European, the American banks, some hedge funds. There were rumors running around about that this afternoon. I think the FED does absolutely nothing. And while the Fed of course never addresses the equity market, when you're down six hundred ten points in a day, I can pretty much assure you that the FED is paying attention. So I

think nothing for the rest of the year. Well, of course the FED maybe I address it directly, but they often speak publicly about that. One of the Fed's chief missions is to keep markets stable. There, that's one of them. They have to be working towards financial stability, which would be perfectly consistent of what you're saying. They're not going to come in and raise interest rates while there is already instability in the markets. But a couple of things.

First of all, by the way, you should we should point out one thing, Kathleen, and that's you all have been focused appropriately on. We're down six hundred ten points. But I want you also to look at the bottom market. You know, the ten years at one fifty six up one unmoss one in three quarters points, people that were in bonds did tremendously well. Today, Oh we we actually came into saying what a tremendous one this has been. In the fact that you called the first one and

a half percent. I think you've also said maybe now one in a quarter percent on the tenure, right, so one in a quarter on the ten years my projection by year end, but we might get there much quicker. Hey, Mark, you're not ask you about you know now you're on a cultural laquota. Former president of Minneapolis FED who seemed to start out as as a hawk in Minneapolis on policy, you know, fight inflation, et cetera, and then turned very devilish.

He says the FED should and must be considering negative interest rates. He thinks, ultimately that's what it would take to turn the economy around. Do you have do you agree with that at all? And what happen would that due to the US bond market, Well, the German ten year is now underneath zero, and so it's what it does is a couple of things. It's not such an easy answer, but it does a couple of things. One, it's very good for the government to have low interest

rates or negative interest rates. However, it's a tax, if you will, on the people, the citizens, because savers, retirees, um money that's managed, you can go through the whole litany suffer tremendously because they can't get any return. One of the arguments that the equity market who done as well as it had this year was because they couldn't get any return in the bond market. I kept saying it was a far safer place to be, and I identified, Uh,

let me go back a little two years ago. I said muties and taxable mutis were the place to be. They've tightened tremendously against treasures. And then I went to closed end bond funds, which trade like equities, but what you really own as a portion of diversified bond portfolio. The eleven that I like are yielding around ten percent.

And when the tenure treasuries at one and the Dow Joe the SMPS flat for the year and has decked down about six percent for a year, I am delighted to get ten percent on my money from the flow of bonds and you get a check every month. Mark Grant, I'll just give you the details here. The SMP five hundred down more than three and a quarter percent so far this year, NASTACK down more than eight percent the ten years so far this year, a gain of more than thirty percent. If you own that ten year should

you sell some of your holdings now take some profits? No? I well, I've gotten Addison fixed income bonds and have advised a number of the large institutions, insurance companies and big state pension funds that they should be looking carefully and they are at going into these some of these closed in funds. So I think if you owned um equities, you're going to have to get more realistic because the

likelihood is we're going down further, not reversing course. And if you own bonds and you have a nice profit, I would look at these clothes in bond phones and what I really like about him is unlike a normal bond where you get a check twice a year. These thanks very much, Mark Grant, Chief Fixed the strategist for Hilltop Securities in Fort Lauderdale. This is Bloomberg Radio