Reported about 1 year ago
With the upcoming release of the US Consumer Price Index (CPI) and PPI data on July 11, market expectations for an interest rate cut have increased due to optimistic comments from Federal Reserve Chairman Powell. The 'King Fund Buy Fund' research department director, Luo Yaoting, suggests that despite adjustments in economic recession and interest rate reduction expectations, the underestimated long-term economic and productivity growth potential in the US could lead to an increase in long-term Treasury yields. Institutional investors are particularly bullish on high-yield corporate bonds and emerging market bonds, as central banks in the US, Europe, and Japan attempt to reduce excess funds in the financial system, causing a decrease in money supply that could create upward pressure on long-term interest rates. In light of the expectation of a prolonged high-interest rate environment, non-investment-grade bonds with high coupon rates and favorable yields become attractive for cash flow needs. The article also highlights the potential flow of funds from the US to emerging markets if the Federal Reserve cuts interest rates this year. Risks of capital outflows from emerging markets due to inflation or currency devaluation appear to have diminished, making institutional investors optimistic about the performance of emerging market bonds.
Source: YAHOO