Tisco Wealth Advisory, through Tisco Bank, is recommending that investors increase their allocation to foreign bonds in order to capture returns from elevated bond yield levels, while also helping to cushion the portfolio against the impact if the Fed resumes accelerating rate hikes in the period ahead. The yield on 10-year US government bonds remains steady at around 5.2%, reflecting that the market has already priced in at least one more rate increase by the US central bank this year. Data from CME FedWatch indicates the market expects the Fed to hold rates steady at its October meeting, while there is roughly a 67.3% chance that the Fed will raise rates by 0.25% at its December meeting. However, weakening US labor market figures in September, particularly nonfarm payrolls rising by only 29,000, down from 133,000 the previous month, are a factor helping to ease pressure on the Fed to accelerate increases in its policy rate.
Tisco recommends overweighting foreign bonds to capture elevated yields, with 10Y US yields steady around 5.2% and market pricing in another Fed hike, keeping upward pressure on the yield.
