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By Pramod ATLURI, Portfolio Manager Capital Group
With inflation falling and the US Federal Reserve (Fed) signalling an end to its historic tightening cycle, the landscape for bond investors is beginning to look much clearer. Even after a sharp rally in late 2023, yields still look more attractive than they have in a decade.
The Fed’s inflation target is within striking distance and rates could come down quickly if growth continues to cool. The prospects of owning duration appear positive. There are also opportunities in yield curve positioning. Cash equivalents may look less compelling as the Fed lowers interest rates, directly reducing its return potential while also creating strong demand for bonds that should bolster returns for that...
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