‘Marts pric­ing Fed rate hike tra­jec­tory too be­nignly’

New Straits Times - - Business / World -

SIN­GA­PORE: United States bond yields are set to rise as the mar­ket is un­der­es­ti­mat­ing how many times the Fed­eral Re­serve (Fed) will raise in­ter­est rates in the next 12 months, ac­cord­ing to Fuller­ton Fund Man­age­ment, the as­set man­ager owned by Te­masek Hold­ings Pte.

The Fed would prob­a­bly raise its bench­mark two more times this year, said Ong Guat Cheng, Fuller­ton se­nior vice-pres­i­dent for fixed-in­come, here.

Fu­tures traders are pre­dict­ing just one more in­crease by yearend.

“Mar­kets are pric­ing the longer term rate hike tra­jec­tory too be­nignly, de­spite the Fed’s guid­ance and firm eco­nomic data,” said Ong

“With the Trump ad­min­is­tra­tion’s pro­posed pol­icy of tax cuts and in­creased in­fra­struc­ture spend­ing, the pace of US growth could ac­cel­er­ate and po­ten­tially en­cour­age the Fed to raise in­ter­est rates at a faster pace.”

Ten-year Trea­sury yields were set to trade in a range of 2.20 to 2.60 per cent this year, said Ong.

Mark Kiesel, chief in­vest­ment of­fi­cer for global credit at Pa­cific In­vest­ment Man­age­ment Co, said 10-year Trea­sury yields might climb to 2.75 to three per cent over the “medium term’’ as the Fed would prob­a­bly raise rates twice more this year.

Bos­ton Fed pres­i­dent Eric Rosen­gren called on Wed­nes­day for his col­leagues to raise in­ter­est rates three more times this year, on con­cern that the cen­tral bank wasn’t act­ing quick enough to pre­vent the econ­omy from over­heat­ing.

Fuller­ton man­aged S$16.5 bil­lion (RM50.92 bil­lion) in as­sets at the end of March. Bloomberg

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