RBS analyst Andrew Roberts says stocks and commodities are headed for a “cliff-edge” and smart investors should buy bonds, CNBC reports.
"All the building blocks are in place to be very bullish on bonds . . . there's a complacency about how the world looks," Roberts wrote in a research note.
Roberts recommended buying long-dated haven bonds in the U.S., U.K. and Germany, noting that the yield on U.S. German bonds could drop below 2 percent, with U.K. debt yields not far behind.
The deleveraging trend currently evident in the global economy follows the "dramatic move up in household debt" of previous years, Roberts notes, but investors aren’t seeing dangers swiftly enough.
"There's no question at all that is going to result in lower-trend GDPs, lower growth, lower prosperity, etc. Don't shoot the messenger here for saying that," he says.
"The next shock and awe will be in the form of large scale QME (quantitative monetary easing), but with one massive difference: It will be focused on lowering yields, not expanding money supply."
U.S. Treasury prices continue to climb as investors worried about the economic outlook continue to buy bonds.
"The consensus view seems to be shifting towards a move to lower rates," Adam Brown, managing director of U.S. government bond trading at Barclays Capital, told The Wall Street Journal.
"There are renewed fears of a double dip. There's definitely talk of economic conditions getting worse from here."
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