Economics & Strategy – Interest Rate Strategy: Third

Although Deutsche Bank drops from first place to third, the ten-member team led by London-based Francis Yared continues to impress clients with “consistency and independence of thought,” as one money manager puts it. The strategists have “a reasonably constructive outlook,” Yared says, for risky assets in general and European assets in particular. This cautious optimism is predicated on a number of variables, however: a benign resolution of U.S. budget negotiations; improvement in credit conditions in Europe; and better economic growth in emerging markets, especially China. Core rates will likely drift higher and spreads will tighten, he predicts, because “the economic cycle should become more supportive with upside risks for the euro zone.” — Carolyn Koo