Bond Market Predictions- CBNC Live Interview

Added: 2026-05-22

[00:00:00]today. But join us now for more on your fixed income market is Nigel Green, CEO and founder of Devere Group. Nigel, happy to be talking to you for the first time and thank you for making the time to chat to us at this afternoon. Take us through what you think is top of mind for bond traders at this stage seeing that the treasury yields have been up and down and quite volatile in fact over the last couple of days.

[00:00:24]Yes, I think it's as you said mixed signals coming out of America and also happening with Iran and that of course is affecting the market. So when you think about the bond market really it's a reflection to some extent of inflation expectations. So people are expecting inflation has gone higher and it could go higher. So that means that fixed yield is higher right now and that means some people will go to fixed yield as an alternative. So bond yield bond yields are certainly proving attractive to people and they've made money in stocks and they're moving to bonds. But of course there's a risk that interest rates go even higher.

[00:01:01]So if some people they're really sat on the fence at the moment and they're really just trying to see what on earth's going to happen in this situation. Yeah, yeah. I saw a note yesterday on CNBC International they were speaking to an HSBC strategist and you know he described this event as US treasuries being or entering a dangerous zone. Now given the fact that we saw yields spike to multi multi high decades. Would you agree with this notion?

[00:01:27]Yes, I think so. I mean if you've got fixed interest is high and then think about that as gravity.

[00:01:33]So you know interest rates are high stock is not going to go up as rapidly.

[00:01:37]So when you've got fixed fixed rates high more money gets attracted to the bond market. But of course if interest rates are high that slows businesses down and means mortgages are more expensive means credit cards are more expensive. So there's a danger that we're in a in a world where rates are high and they have to stay higher for longer simply because inflation doesn't stop. You've seen in in South Africa, you see it around the world. You've already had a spike because of oil.

[00:02:03]That hasn't come through totally yet.

[00:02:04]There's more inflation to come simply and solely because of transportation, etc. of all goods. Yeah. And speaking of inflation, how concerned are you about the re- escalation of inflation linked to the Iran war as between to the US at this stage?

[00:02:21]Yeah, I mean, I think you've got inflation because of the war to to some extent. You've also got inflation occurring AI as well. You know, AI currently is inflationary. Now, the theory is that as AI develops, it becomes deflationary. So, just think at the moment that AI is taking lots of resources. It's taking energy. There's a lot of expenditure going into AI.

[00:02:41]Currently, it's inflationary. So, that's driving up some of the energy costs.

[00:02:45]You've also got a world where people aren't trusting the government.

[00:02:49]So, they think the government's going to be lending money, if you like, with bonds. And, you know, what's the what's the credibility of that government? Are they nervous about it? So, when there's a war, it gets more uncertainty. And, of course, that leads to higher yields in bonds. Yeah. Yeah. Yeah. Your best case for inflation in the States?

[00:03:07]Oh, wow. Okay, my best case.

[00:03:10]We get a We get a short-term another increase, but it's transitionary.

[00:03:16]In other words, I mean, particular country, let's go with South Africa again, where it's it's hit, and but it goes away quickly. I mean, if the straits open, oil doesn't go down immediately. So, people think that's instant. They've got to catch up on a deficit. But, let's best case, 3 to 6 months there's a drop-off. You've already got a struggling economy. So, it's not an economy where there's full employment.

[00:03:39]If you've got inflation and full employment, then inflation tends to stay around cuz you get wage inflation. So, it could be transitionary. And, if that's the case, then best case is we start to get interest rates coming down in 3 months. But just bear in mind if interest rates come down, let's talk about South Africa again just as an example, but it's the same thing around the world. Interest rates come down, the currency comes down. So if the rand comes down, then oil is priced in dollars, okay, it goes up, so you're causing more inflation. So they've got to be careful not to lower it too quickly. Otherwise the value of the the rand will fall causing more inflation. Yeah. So there's things that are needed to be done to stimulate economies. Yeah. Yeah. Now that you've mentioned South Africa, we had the local inflation numbers yesterday that showed that the point is to a spike in price pressures, of course, but more reflecting the fuel had that we saw um the previous month. It moved from 3.1% to 4% in April. That is a huge jump.

[00:04:39]Uh we have South Africa's rate-setting meeting next week, and I would say that the decision so far appears to be finely balanced between a hike and a hold.

[00:04:47]Wondering which side of the table you are on here, Nigel.

[00:04:51]I'm on the I'm on the iron hold today.

[00:04:53]Um sorry. Yeah, I think 100% hold, you know, you can't reduce interest rates.

[00:04:57]I'd love love them too, but you can't reduce interest rates at the moment, but you do have to stimulate the economy. I mean in in you've got a situation whereby can you encourage entrepreneurship? Can you try and do something with tax to encourage the engine of the economy to grow faster?

[00:05:12]That's what was really needed. Interest rates need to be left on hold for the moment, but let's look at the engine of the economy, okay? That's that's what really needs fixing. How can you encourage South Africans to want to stay in South Africa and really be creative and create new business?

[00:05:29]Entrepreneurship's what's needed, not just in South Africa, but lots of countries around the world. Sure. And what about inflation for South Africa at this point? Do you reckon it would go higher from the 4% that we saw yesterday or it would come down in the months ahead?

[00:05:45]>> I think it's I think it's going up, unfortunately. So, we got four at the moment.

[00:05:49]Uh I think that's a reflection of the fuel prices. I still feel that there's more of that to come through into other goods. Goods are transported, and they're they're going to feel the cost of transportation, as well. So, we got We got more to come, short term.

[00:06:03]Short term. All right. But, at what point would you um be forecasting an interest rate hike as pertains to South Africa, given the fact that you are uh projecting a hold in May? What about the months ahead? Do you still see interest rate hikes this year? And at what point then can we start bringing back conversation around interest rate cuts uh in picking to the in into into our discussions?

[00:06:26]I mean, I think as soon as possible, countries need to look at trying to cut cut costs. You know, when you've got rising unemployment, you know, there's two factors here. One is inflation, but also at the same time, you've got a lot of people that are unemployed. Got to stimulate that economy, otherwise, you're going to get a complete drop-off.

[00:06:42]You don't want inflation to be high and then suddenly drop to zero, and there's been mass unemployment. Okay, really need, as soon as possible, to start looking at cutting interest rates. Uh it's not going to be now. Let's be realistic, but as soon as they can, let's go for 2-3 months. Okay, countries have got to look then to the future and look to cut interest rates as quickly as possible. All right. Going back to the States and just to remember our conversation, um we had the Fed minutes coming out uh yesterday. How are you absorbing uh those minutes from the Fed right now?

[00:07:14]And kind of well, again, you know, same thing. They want to cut, as well.

[00:07:18]>> [laughter] >> Um so, you will see with America, they want to cut.

[00:07:21]Um okay, I think it's sensible for them to, not right now, but as soon as they can. You know, we we still got the same thing there. It's not dramatic as dramatic on unemployment, but you've still got this K curve in the K-shaped economy, whereby you've got stock markets at record highs, but you've got unemployment increasing.

[00:07:41]Um and you know, we can't have economies where you've got companies doing extremely well, but there's no there's there's a lack of employment. So, cutting interest rates and helping companies grow, but also helping individuals I think it's going to be on everybody's agenda. Yeah. Yeah, agreed.

[00:07:58]Nigel, we'll leave there for now. Thank you, sir, for making the time to speak to us today. Uh really appreciate it.

[00:08:03]And that was Nigel Green, CEO and founder uh deVere Group. Let's put