US Bond ETFs Slash Interest Rates, But Prices Plummet: When Can Investors Expect a Turnaround

The US Federal Reserve decided to cut interest rates by 2 percentage points in September after considering inflation and employment risks. However, after the interest rate cut, bond ETFs The performance, however, did not rise but fell Investors who wanted to take advantage of the opportunity to profit from the price difference poured cold water on them. How should we look at the future trend of bonds?

“At the moment, US economic data is slowing down, but not yet at recession level; inflation is indeed going down, but it still hasn’t reached the 2% target. So, it’s r the chances of seeing sustained and significant interest rate cuts are not high along with the fierce battle in the US presidential election, past experience shows that once Trump is elected, he will is detrimental to the performance of the bond market in the short term, causing this wave The bond rally has been relatively limited.

Zhang Youyin said that as long as the Fed starts the cycle of interest rate cuts, it will not end soon. “Investors who have already jumped on the bus must hold it for at least half a year before they can enjoy the capital gains from bonds; if they want to operate in a short-term range, or if empty-handed investors want to get along. the bus in a deal, it is recommended to wait for the US economic data to be better than expected, and the US Enter the market or increase your position when the 10-year bond yield reaches 3.8 to 3.9% . “

He emphasized that the purpose of Federal Reserve interest rate cuts is to prevent economic recession and bond allocation. “The US economy is showing weakness, and the stock market will reflect the risk of a downward revision of the economy. Market volatility is expected to be quite intense in the future. From an anti-risk point of view, investors can using bond positions to mitigate portfolio fluctuations.”

Zhang Haoyin suggested that prudent and conservative investors can allocate 50% to 60% of their bond positions, mainly long-term investment grade bonds, BBB or higher, and hold them for at least 6 months In addition to receiving fixed bond interest income, they can also reduce overall portfolio volatility risk. For example, 00948B (CITIC U Investments Investment Grade Bond) has a yield to maturity of 5.73% as of September 20. It dominates the major domestic investment grade bond ETFs and deserves the attention of investors who prefer fixed debt interest rates .