Inflation weighs on Asian bond sentiment, despite expected pause in Fed rate hikes

INFLATION concerns are keeping some analysts from calling a fresh bull cycle for Asian bonds, despite expectations of a pause in the US Federal Reserve’s rate hike cycle.

The Fed has raised its target short-term rate by 500 basis points since March 2022, and the five-year US Treasury now yields about 4 per cent – from below 0.5 per cent in August 2020.

Because US Treasuries provide a “risk-free” benchmark for global debt markets, bond yields are now at an elevated level, said Loomis, Sayles & Co senior credit analyst Feng Zhi Wei.