Bonus investors adhere to a neutral position before Fed meeting

From Gertrude Chavez-Dreyfuss

New York Investors (Reuters) have taken a neutral position at a two -day monetary policy meeting of the Federal Reserve this week, reflecting on a continuous caution by United States commercial policy, which threatens to immerse the world’s largest economy in recession.

Fixed income investors said that they remain neutral in relation to their reference points, reducing their long -term exposure or preferring to remain at the shortest end of the performance curve.

“We are in this restless balance between the growing economic concerns, as we see some gentle data, but also the potential of political shocks that could affect the perspectives of inflation and the deficit,” said Chip Hughey, General Director of Fixed Revenue in Trupt Advisory Services of Richmond, Virginia.

Being neutral means following the point of reference for the duration of the portfolio. For example, if the duration of the reference is five years, a neutral position would suggest staying in fixed income assets with five-year or around these surroundings.

The duration, which is expressed in the number of years, provides an indication of the extent to which the value of the obligation will fall or increase when the interest rates are moved. In general, when the rates fall, the links of the highest duration attract a greater increase in value compared to those that have a lower duration.

The investors extended the duration for most of 2024, believing in the moment the Fed started in a deeper rate reduction cycle. Long -duration bets typically involves buying longer assets on expectations of reducing returns.

On Wednesday, the Central Bank of the Central Bank of the Central Bank of the United States is expected to maintain its interest rate during the night at the rank of 4.25% -4.50%. The payroll data not dedicated to the United States stronger than expected in April last Friday also gave Fed a little margin to keep the rates inalted.

Since the last meeting of the FED in March, the administration of President Donald Trump has introduced a massive commercial shock that increased effective rates, especially in Chinese assets.

This prompted a sale of Treasures from the United States, which, at any given time, pushed for the 10-year reference that produces more than 70 basic points (BPS) greater than 4.6% during the period 3-11 April. The performance of the U.S. ten years is currently 4.357%.

In his post-reunion press conference on Wednesday, Fed President Jerome Powell is likely to indicate that Trump’s tariff clash could lead to higher inflation and an increase in unemployment, with the recession not an unpleasant scenario.

No preventive movement

“The Fed is unlikely to act in a preventative manner, giving the expectation that inflation is facing and the size of the fare shock could have persistent inflation effects,” Morgan Stanley’s analysts were written by the American economist Michael Gapen in a research note.