Last year, the fixed income market reflected a very extreme attitude, and the T-noteAmerican debt with a maturity of 10 years is a good example. US bond yields hit a yearly high of 4.7% in April, as strong Personal Consumption Deflator (PCE) data ruled out the possibility that the US Federal Reserve (Fed) would cut rates as soon as possible. foreseen. In September, however, this yield reached its lowest level in 15 months, at 3.6%. However, the yield on American sovereign debt is just between these two points: at 4.2%, but, in this context, could we see more selling pressure, leading the title to the maximum environment that we have known in the past? the last 12 months?
Analysts consulted through this they do not believe that T-note return to maximum profitability (at 4.7%-5%), and they believe that the market has gone too far in considering a scenario of very rapid declines in interest rates. And it is precisely the cooling of expectations regarding the pace of rate cuts that the Fed will make in the coming months that has motivated the strong flight of investors in recent days.
The strength of the latest macroeconomic data erased a further rate cut between Wednesday and Thursday of this week in the timetable expected by investors for the coming months, and now the roadmap expected by the markets points towards a scenario of four 25 basis point cuts by the Fed until June next year, and five reductions of the same caliber from the European Central Bank.
“The market, as always happens in times of change in monetary policy, has gone too far in considering a scenario of a very rapid drop in interest rates. The realization that inflation is starting to moderate around 2% or less, while economies continue to demonstrate a certain solidity, has meant that these expectations, which we never share at Buy & Hold, have been moderated”, explains Antonio Aspas, partner and advisor at Buy & Hold.
In this sense, the expert indicates that central banks “control the evolution of rates in a year or two with their decisions, but in the longer term, market expectations have more influence.” Thus, with the data already mentioned, adds the expert, “we realize that interest rates will hardly be able to stay below 2% or 3% in the medium term”. “That said, although this is not the opportunity of the century to invest in fixed income (the end of 2022 was with much more clarity and potential, as we said then), Yes, we think it is the right time to invest in this asset, but always with scrupulous analysis and active selection of securities,” he adds.
David Ardura, chief investment officer of Finaccess Value, doubts that those 4.75% or 5% yields will be seen on the U.S. bond, “but if we did see it, it would definitely be a good opportunity to be very aggressive over timein a scenario where inflation tends towards 2%. But the truth is that in the market it is very difficult to find the precise point where everything will change,” he says.
Juan José Fernández-Figares, director of IIC Management at Link Securities, believes that it will be difficult for US bonds to reach these levels “unless the US elections give absolute control of Congress, the Senate and the House of Representatives to the party that wins the presidency. “.
“Trump and Harris have proposed expansionary fiscal policies, which will increase the country’s already high public deficit, public debt and, since these are growth policies, likely inflation. This issue is one of the factors that push” many investors to recalibrate their expectations. rate cuts by the Federal Reserve (Fed). The other is the strength that this economy continues to demonstrate, which makes it more difficult to reduce inflation to the 2% target,” explains Fernández-Figares.
Víctor Alvargonzález, founding partner of Nextep Finance, does not believe that the T-note will achieve a profitability of 5%, and opts instead for European debt. “We consider that the moment is good for European bonds, because in Europe the evidence of lower inflation and lower rates is greater,” he concludes.
Most profitable funds
Among the most profitable American debt funds of the year, taking into account vehicles in the diversified bond category with euro class, JPM US Short Duration Bond C (acc) EUR This is the first in the ranking, with data as of October 25, with a yield of 6.54%.
Franklin US Low Duration A(acc)EUR, of Franklin Templeton, also reached this annual barrier of 6% (see graph). The CaixaBank fund Caixabank Standard Rate Dollar FI close it top 3 of the most profitable products, with 5.91%.
