A big problem for global financial markets over the past week has been the rise in the US bond yields and there is an ongoing fear that this could perhaps put a stop to the ongoing equity rally. CNBC-TV18's Latha Venkatesh spoke to Chetan Ahya, the Chief Economist and Global Head of Economics at Morgan Stanley, about his views on the same.
"There is going to be a strong pick-up in growth. We have been calling for a demand surge from March-April and the market is more and more getting confident on that outlook," he said.
Stronger growth and inflation is getting priced in the bond market, he shared. He believed that in the US the markets were moving ahead of the Fed in terms of discounting the better growth and inflation environment.
Speaking about Morgan Stanley's estimate of bond yields by March-end or June-end, he mentioned, "We are talking about 10-year bond yield going through to the year-end by about 1.2 to about 1.5 percent. There are upside risks if growth surprises on the upside."
Ahya doesn’t expect the Fed to tighten rates aggressively. “The fundamentals of the economy will be very different and so in that sense the Fed will not be ahead of the curve and tightening in aggressively,” he shared.
On emerging markets (EMs), he mentioned, “Emerging markets are in different shape. India and all the other EMs have a much better current account balance."
The current rate cycle is somewhat similar to 2003 to 2007 where the US was seeing the rise in real rates but EMs still had strong export growth and did pretty well. “We should not see a big problem for EMs with this rise in US real rates,” he stated.
For more, watch the video...
(Edited by : Priyanka Rathi)
First Published: Feb 24, 2021 3:01 PM IST
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