Yield opportunities for the contrarian investor

Wage pressures increasing

Consensus is a wonderful thing, not because it necessarily forms around a correct view of the world, but because it opens up investment opportunities for those prepared to take a contrarian approach.

An inevitable by-product of consensus in financial markets is that alternative outcomes, however plausible, become under-priced. A case in point is the outlook for long-term interest rates. That US borrowing costs are on the way up is taken as read. The only debate is how high 10-year Treasury yields can be expected to rise. This is not an unreasonable view. 10-year Treasury yields bottomed at 1.36% on 8 July 2016 and have since more than doubled. Unemployment is low and wage pressures are increasing. US Treasury yield curve flattens to lowest level since financial crash Meanwhi...