Deutsche Bank is pessimistic about some emerging market bonds, and the possibility of the Federal Reserve lowering interest rates is unlikely to stimulate a surge of funds.
J.P. Morgan's view on some emerging market sovereign debt has turned cautious, with the bank believing that the Fed's rate cut is unlikely to stimulate a large influx of funds into bond funds. Strategists like Simon Waever suggest a short-term bearish view on this asset class, increasing cash levels in their portfolios, focusing on investment-grade bonds rather than higher-risk bonds, or selling credit default swap indices on emerging markets. According to a report released on Monday, the bank has excluded Nigerian, Argentine, and Moroccan bonds from a basket of preferred bonds, and included 'cheaper' Mexican and Romanian bonds. They predict that the US interest rate market has already digested the economic soft landing expectations. 'Further decline in US Treasury yields may not be favorable for risk appetite,' they said, 'after the first rate cut, it may take up to 12 months for funds to shift from money market funds to risk assets.'
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Deutsche Bank is pessimistic about some emerging market bonds, and the possibility of the Federal Reserve lowering interest rates is unlikely to stimulate a surge of funds.
J.P. Morgan's view on some emerging market sovereign debt has turned cautious, with the bank believing that the Fed's rate cut is unlikely to stimulate a large influx of funds into bond funds. Strategists like Simon Waever suggest a short-term bearish view on this asset class, increasing cash levels in their portfolios, focusing on investment-grade bonds rather than higher-risk bonds, or selling credit default swap indices on emerging markets. According to a report released on Monday, the bank has excluded Nigerian, Argentine, and Moroccan bonds from a basket of preferred bonds, and included 'cheaper' Mexican and Romanian bonds. They predict that the US interest rate market has already digested the economic soft landing expectations. 'Further decline in US Treasury yields may not be favorable for risk appetite,' they said, 'after the first rate cut, it may take up to 12 months for funds to shift from money market funds to risk assets.'