Global Government Bond Price Rally... Wall Street Says "Now Is the Right Time to Invest"

US Fed Holds Key Interest Rate Steady
Global Rally on Tightening End and Rate Cut Expectations

As expectations that the US benchmark interest rate has peaked gain traction, global government bond prices are rising. After the US Federal Reserve (Fed) held the benchmark interest rate steady for the second consecutive time the day before, investors lowering their rate outlooks are flocking to the bond market.

On the 2nd (local time) in the New York market, the yield on the US 10-year Treasury note, a global bond benchmark, fell intraday to 4.63%. This was a 0.19 percentage point drop from the previous day, marking the largest decline since the collapse of Silicon Valley Bank (SVB) in the US last March.

European bond yields also fell across the board. The yield on the German 10-year government bond, the Eurozone bond benchmark, dropped 0.05 percentage points to 2.7%. The UK 2-year government bond yield fell 0.09 percentage points from the previous day to 4.7%, the lowest level since June. The 10-year government bond yield also declined 0.15 percentage points to 4.35%. The Fed’s decision on the 1st to keep the benchmark rate steady at 5.25?5.5% for the second consecutive time, along with the Bank of England (BOE) deciding a day later to maintain rates at 5.25%, led to the decline in government bond yields.

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A decline in government bond yields means a rise in bond prices. It is analyzed that the Fed’s rate hikes, which lead the global currency market, have effectively ended, and major central banks such as the European Central Bank (ECB), BOE, and Bank of Canada have completed their tightening cycles, prompting investors to flock to the bond market. Although Fed Chair Jerome Powell left open the possibility of further rate hikes, the market interprets his remarks as dovish (favoring monetary easing) and largely theoretical. Solita Marcelli, Chief Investment Officer (CIO) for the Americas at Swiss UBS Asset Management, said, "This meeting likely confirmed that the Fed has completed its tightening, and it supported our view that the market had priced in rate expectations too aggressively, anticipating a prolonged period of high rates."

There is also analysis suggesting the need to pay closer attention to the bond market going forward. Richard Saperstein, CIO of US asset management firm HighTower Treasury Partners, said, "The effects of Fed tightening are showing, and economic activity will slow further. Stocks probably peaked this year, and now attention should turn to the bond market." While noting that the federal government’s fiscal deficit and large-scale issuance of government bonds are upward pressure factors on rates, he emphasized, "Now is a very good time to invest in government bonds."

Gregory Pescoue, Global Bond CIO at Amundi, Europe’s largest asset manager, said, "We have already seen a recession in Europe, and at some point, we will see the same situation in the US," adding that they are "considering increasing the proportion of US Treasuries in the portfolio."

This content was produced with the assistance of AI translation services.