Top of Eigen’s ‘bad’ list is emerging market debt, which he is shorting in a variety of ways due to the fallout from the commodities slump and imminent Fed tightening.
Generic investment grade credit, agency mortgages and municipals are also have the bad label due to their sensitivity to rate rises.
The ugly parts of fixed income in Eigen’s view include sovereigns, which are tied to the decisions of central banks.
“We live in a world dominated by price-insensitive buyers, like central banks, which have driven the prices of sovereign debt securities to all-time highs. To negatively impact the market such buyers do not need to turn into sellers, but simply decelerate their rate of purchases. We don’t pretend to know what trajectory central bank policy globally will take and think it is extremely precarious for investors to link an investment strategy to the words and promises of central bankers,” Eigen said.
