BlackRock's Rieder on Jobs Report, Fed Rates and Bonds

Rick Rieder, BlackRock's fixed income CIO, sees a 'productivity revolution' driving a solid US economy with strong earnings but muted hiring. He argues Fed hikes are ineffective for services inflation and fiscal policy is needed. In fixed income, he favors high-quality bonds with high coupons, adding European and EM debt, avoiding US IG credit on supply concerns, and favoring securitized assets like CMBS and ABS. - July jobs report 'unremarkable' and a productivity revolution is reducing the need for hiring. - Fed unlikely to hike; cuts possible later if economy slows, but the committee remains hawkish. - Recommends high-quality bonds (A-minus average) yielding high sixes without stretching credit quality. - Adding to European fixed income and finds emerging markets debt interesting if the dollar stays stable. - Avoids US investment grade credit due to heavy supply from data center and hyperscaler issuers. - Sees securitized assets (commercial real estate and ABS) in pretty good shape. - Not adding interest rate exposure, prefers clipping coupons in a short-duration, boring bond portfolio. - Demographic demand from insurers and pensions is absorbing the historic supply of debt.