Impact of Changes in the US Bond Market on Global Investments
The rise in long-term US Treasury yields and the Federal Reserve's policy to maintain high interest rates are significantly impacting global investment markets. This policy undermines the traditional view of US Treasuries as a safe asset, highlighting them instead as new risk factors. Long-term Treasury ETFs like TLT have experienced considerable losses, prompting institutional investors to adjust their portfolios accordingly. Additionally, the prices of technology and growth stocks have been adversely affected.
On the other hand, ETFs focused on sectors with stable cash flows such as defense, energy, infrastructure, and dividend stocks have managed to deliver relatively robust returns. Investors are now focusing on investment opportunities that offer predictable cash flows, leading to an increase in popularity for short-term and monthly dividend-paying ETFs. These changes signify a shift towards a new investment paradigm in the era of high interest rates.
Domestic investors are responding to delays in the Federal Reserve's rate cuts and increased US government debt by redirecting funds into ultra-short-term bond ETFs. Interest in BlackRock's under-3-month US Treasury ETF (SGOV) among domestic investors is growing, reflecting a concurrent outflow from long-term bond ETFs. Although demand for US Treasuries is generally decreasing due to market volatility, potential easing of the SLR regulation might improve liquidity conditions in the US bond market.
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Retail Investors Weary of US Long-term Bonds Opt for Short-termSecurities > Foreign Stock Market News: With the Federal Reserve delaying rate cuts and US government debt surging, the volatility of US Treasury bonds is prolonging. Domestic investors are turning to US ultra-short-term bonds...
US Long-Term Bond Yields Surge: A Signal for Changes in Investment Landscape - Korea Economic DailyUS long-term bond yields surge, signaling changes in the investment landscape, shaking the 'Treasuries = Safe Assets' paradigm. 30-year bond yields rise to 4.8% per annum. Long-term bond ETFs have posted negative returns this year. US Treasuries are perceived as a risk factor. The traditional portfolio strategy of 60% stocks and 40% bonds is shifting. In Korea, funds are flocking to short-term bond ETFs. Now, long-term bonds act as a risk. The need for dividend income and liquidity management increases.