US bonds just got rosier with Fed deciding against rate hike

New York

BEING bullish on the US bond market just got a lot easier. Not only did the Federal Reserve hold the line on interest rates last week, central bank officials yet again cut their forecasts for how high borrowing costs need to rise over coming years. For the first time, they also explicitly cited the rising risks of international turmoil such as China's slowdown in their decision to keep benchmark borrowing costs near zero.

With traders betting inflation will remain below the Fed's 2 per cent target for at least a decade, some of the biggest investors are convinced bonds will stay in demand for years to come. And once the central bank does lift rates - which the market doesn't see until at least 2016 - Prudential Financial and State Street Corp say policymakers will be exceedingly cautious to avoid upending the economic recovery.