KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
The bond market's reaction to the Federal Reserve’s rate cuts has been anything but conventional. Yields on 10-year US Treasuries have risen sharply, defying expectations of easing-induced price gains. The result is a uniquely difficult landscape for bond traders heading into 2025.
Key Highlights
- Rising Yields: 10-year Treasury yields have increased by over three-quarters of a percentage point since September, marking the steepest rise in the early stages of a Fed rate-cut cycle since 1989.
- Fed’s Caution: Policymakers project just two 0.25% rate cuts in 2025, with inflation concerns driving a slower pace of easing.
- Economic Resilience: Despite high borrowing costs, the US economy remains robust, keeping inflation above the Fed's 2% target.
Market Implications
- Steepener Trade: Traders are capitalizing on the spread between short-term and long-term yields, with 10-year yields trading above 2-year yields for the first time since 2022.
- Short-Term Bonds in Favor: 2-year notes, offering yields close to cash equivalents, are attracting buyers as they provide a cushion against economic uncertainty and potential Fed rate cuts.
- Long-Term Bonds Under Pressure: Persistent inflation, coupled with President-elect Donald Trump's anticipated fiscal policies, is deterring interest in longer-dated securities.
Trump Administration’s Impact
- Fiscal Expansion: Increased spending under Trump’s economic agenda is expected to push long-term yields higher, exacerbating fiscal pressures.
- Inflation Risk: Policies targeting growth may intensify inflation, challenging the Fed’s ability to pivot further on rates.
Looking Ahead
Bond investors are navigating an environment of mixed signals: cautious Fed policy, resilient economic performance, and potential volatility stemming from fiscal and geopolitical developments. While short-term Treasuries offer relative safety and appeal, long-term bonds remain a riskier proposition amid uncertainties over inflation and fiscal policy.
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