KUALA LUMPUR, July 30 (Bernama) -- Bursa Malaysia's key index closed at an intraday high today, supported by continued buying interest even as renewed geopolitical tensions and a weaker overnight lead from Wall Street following the US Federal Reserve's (Fed) decision to stand pat on interest rates weighed on broader sentiment. The Fed has decided to hold rates steady for the fifth consecutive meeting, with the Federal Funds Rate unchanged between 3.50 per cent and 3.75 per cent. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.84 points to 1,720.40 from yesterday’s close of 1,715.56. The benchmark index, which opened 1.14 points lower at 1,714.42, hit its lowest level of 1,710.69 in early trade before gaining momentum for the rest of the day. However, the broader market was negative with losers outpacing gainers 581 to 411, while 612 counters were unchanged, 1,173 untraded, and 87 suspended. Turnover declined to 2.49 billion units valued at RM2.25 billion from ...
Amid this uncertainty, asset managers such as BlackRock Inc., Pacific Investment Management Co. (PIMCO), and UBS Global Wealth Management are recommending that investors focus on five-year bonds, which offer a balance between risk and reward. Solita Marcelli, chief investment officer at UBS Global, suggests positioning portfolios in medium-term Treasuries and investment-grade corporate securities to hedge against potential economic shocks and capitalize on durable income opportunities.
Investors have reduced their rate-cut expectations, with only 45 basis points of easing now priced in for the Fed's upcoming meetings. This is a reduction from the previously expected half-point cut following the September jobs report. Options trading reflects this sentiment, with a single quarter-point rate cut likely by the end of the year, followed by a pause in early 2025.
Adding to the volatility is uncertainty surrounding the US election and the Treasury’s upcoming note and bond sales announcement, which could affect long-term yields. Citadel Securities warned clients to expect “material volatility” in the bond market for the remainder of the year, while BlackRock's David Rogal noted that elevated volatility is likely as the election draws closer, affecting investor expectations for US fiscal policy.
Many investors, including Capital Group’s Anmol Sinha, are favoring shorter-duration bonds, particularly those with five-year maturities, due to concerns over rising US deficits and the potential for a growth slowdown or recession. However, others, such as Vanguard, see opportunities in 10-year Treasuries as yields near 4.1%, signaling a potential "buy zone" for long-term investors.
Vanguard’s Roger Hallam expects the US economy to slow next year due to the Fed’s restrictive policies, which could create further opportunities to increase bond holdings as yields rise. The firm continues to benefit from a short-term tactical position in Treasuries but has begun trimming its exposure as yields continue to increase.
With Treasury supply concerns and economic risks on the horizon, many traders are navigating the bond market’s ongoing turbulence by seeking balance between shorter-term security and long-term potential in this volatile environment.
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