403
Sorry!!
Error! We're sorry, but the page you were
looking for doesn't exist.
Investors turn to bonds amid recession fears, expectations of federal interest rate cut
(MENAFN) As recession fears take precedence over inflation concerns, investors have been flocking back to bonds, seeing them as a reliable hedge against the recent volatility in the stock market. Last week, U.S. Treasuries and other high-rated debt surged significantly, driving their yields down to their lowest levels in over a year. Although these gains were partly reversed later, the initial rally underscores the growing appeal of bonds in a climate of slowing economic growth and declining inflation. Fund managers anticipate that the Federal Reserve and other major central banks will implement several rate cuts by the end of the year, further enhancing the attractiveness of fixed-income investments.
Investors have actively been channeling their funds into U.S. government and corporate bond markets, with USD8.9 billion flowing into these assets so far this month alone. This follows a robust inflow of USD57.4 billion in July, marking the highest monthly total since January and the second-largest since mid-2021. High-quality corporate debt has experienced ten consecutive weeks of positive inflows, a streak not seen in four years. Robert Tipp, head of global bonds at PGIM Fixed Inc., emphasized that Treasuries offer substantial protection against potential downturns, such as a recession, particularly in the wake of weaker job reports that have spurred investors to shift out of cash.
Since late July, a news agency index tracking U.S. government and high-grade corporate bonds has risen by 2 percent, in contrast to a 6 percent decline in the S&P 500. The bond market saw its most substantial gains on the day the U.S. jobs report was released, highlighting the growing investor preference for bonds over stocks. The weak jobs data from early August, which revealed an unexpected rise in the unemployment rate to 4.3 percent in July and fewer job additions than anticipated, has led futures traders to price in more than a one percentage point cut in interest rates by the end of the year. This expectation includes at least one significant half-point cut during the remaining Fed meetings in 2024, a shift from previous expectations of three quarter-point reductions.
Investors have actively been channeling their funds into U.S. government and corporate bond markets, with USD8.9 billion flowing into these assets so far this month alone. This follows a robust inflow of USD57.4 billion in July, marking the highest monthly total since January and the second-largest since mid-2021. High-quality corporate debt has experienced ten consecutive weeks of positive inflows, a streak not seen in four years. Robert Tipp, head of global bonds at PGIM Fixed Inc., emphasized that Treasuries offer substantial protection against potential downturns, such as a recession, particularly in the wake of weaker job reports that have spurred investors to shift out of cash.
Since late July, a news agency index tracking U.S. government and high-grade corporate bonds has risen by 2 percent, in contrast to a 6 percent decline in the S&P 500. The bond market saw its most substantial gains on the day the U.S. jobs report was released, highlighting the growing investor preference for bonds over stocks. The weak jobs data from early August, which revealed an unexpected rise in the unemployment rate to 4.3 percent in July and fewer job additions than anticipated, has led futures traders to price in more than a one percentage point cut in interest rates by the end of the year. This expectation includes at least one significant half-point cut during the remaining Fed meetings in 2024, a shift from previous expectations of three quarter-point reductions.
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.
Comments
No comment