US Bond Yields Approach 5%, Recommend Buy on Dip for Long-Term Bonds

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Mr. Poon Panichphiboon, a market strategist at Krungthai GLOBAL MARKETS, Krungthai Bank Public Company Limited (KTB), revealed that the 10-year US bond yield is moving around the 4.79% zone, with market players awaiting US economic data. Meanwhile, risk-off conditions have helped reduce pressure from inflation concerns after energy prices rose due to the Middle East situation. KTB recommends gradually buying long-term US and Thai bonds, as current yield levels account for the risk that the Fed may raise interest rates 2-3 times this year, which could cause the 10-year US bond yield to test the 5.00% zone. This level is lower than the break-even yield, which could be as high as 5.20%-5.30%. They believe that rate hikes will eventually pave the way for long-term yields to decline, in line with slowing economic growth and inflation, and the Fed may cut rates next year. Therefore, they recommend a buy-on-dip strategy for long-term bonds. As for the baht (USDTHB), it faces two-way risk in the short term, depending on Fed monetary policy and the Middle East situation. They recommend using options strategies to hedge against risk.

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