Reported 8 months ago
The U.S. Federal Reserve decided to maintain interest rates in June 19, 2024, indicating a strong economy, with expectations that Chair Powell will set a lower threshold for starting interest rate cuts if inflation further slows down. This could boost the performance of risk assets like stocks and credit bonds. Global central banks, including the ECB and Bank of Canada, are expected to lead the way in cutting interest rates ahead of the Fed, spurring investment in high-yield bonds. With improved overall tech bond yields, narrowing credit spreads, and positive economic and industry fundamentals, non-investment grade bonds are supported. It's suggested to focus on B-BB rated companies with strong quarterly financials and optimistic future outlooks in industries like computers, semiconductors, fintech, and antivirus software. Market conditions indicate reduced attractiveness of U.S. credit bonds due to rising interest rate risks, while European and global bonds are becoming more appealing. In this context, it's recommended to maintain a mid-term duration amid delayed Fed rate cuts expectations. Priority asset-backed non-investment grade bonds are favored against default risks, especially during market volatility. The outlook is positive for raw materials, automotive, energy, and leisure industries. Fund managers suggest that subdued inflation and rising rate cut expectations favor bond investments, with all credit ratings expected to benefit. Historical trends show that about six months before rate cuts, market rates tend to trend downward, presenting a good opportunity to enter the market while yields are relatively high. With a focus on mid-range to high-rated investment and non-investment grade bonds, the ability to take on credit risk and choose ratings with favorable spreads can enhance return potential and investment efficiency.
Source: YAHOO