Hedge fund managers are increasingly cautious regarding US credit, according to a report from Lyxor, which suggests that 65 per cent of managers are not expecting the current credit rally to continue.
This is being seen in the context of rising fears concerning financial stability following the extended period of near-zero interest rate policies implemented by the major central banks.
Overall, the results of the survey indicate positive sentiment concerning risk assets. Equities are largely expected to continue to rally, both in the US and Europe, on the back of accommodative monetary conditions recently reiterated by Janet Yellen.
The majority of the respondents to the survey currently expect the central banks to remain extremely accommodative. The view is that the ECB and the BoJ should implement (or expand) quantitative easing programmes in the second half of 2014. At the same time, only 47 per cent of respondents think that the Fed will lift rates in the first half of 2015. As a result, 10-year Treasuries are not expected to reach three per cent over the next six months.
The bullish stance on equities, both in Europe and in the US, is largely shared by the respondents to the survey. The level of agreement that US equities are not overvalued and European equities remain undervalued is very high.