The sharp selloff in the $25 trillion Treasury market that gathered steam since last week has been spooking investors, but it also may be an good investing opportunity, said Andrew Szczurowski, a portfolio manager at Morgan Stanley Investment Management, and a part of its government bond strategy team.
Szczurowski attributed part of the massive selloff to the Federal Reserve signaling last week that rates may stay higher for longer than previously anticipated, which eventually would pinch corporate profitability and potentially spur more defaults. The current backdrop also differs from a year ago in that a “buyers’ strike” from institutional investors appears to be forming, he said, whereas investors last September were “buying the dip” as stress in the U.K. pension system rattled financial markets.Still, Szczurowski said a soft landing for the economy would be tough for the U.S. to achieve, if rates stay high, the labor market stays strong and inflation ends up resistant to falling all the way back to the Fed’s 2% annual target.