Vanguard bets on long-term US Treasuries after 'cruel summer' for bond investors
© Reuters. FILE PHOTO: The logo for Vanguard is displayed on a screen on the floor of the New York Stock Exchange in New York City, U.S., June 1, 2022. REUTERS/Brendan McDermid/File PhotoNEW YORK - U.S. asset manager Vanguard is bullish on longer-dated Treasuries after this year's brutal selloff, betting that the Federal Reserve is at the end of its rate hiking cycle and that the economy will slow next year.
An economic slowdown, in theory, would force the Fed to cut borrowing costs, pushing down prices of shorter-dated Treasuries as they are more sensitive to interest rates and heightening the appeal of longer-dated bonds. Expectations that the Fed will cut interest rates to boost an economy hit by much higher borrowing costs have been pushed out several times this year, as economic activity has remained surprisingly resilient to the interest rate hikes delivered so far by the U.S. central bank as it seeks to curb inflation.
"We believe we are in a new era for fixed income in which bonds offer significantly more value - both in total returns and as better ballast within an overall portfolio," Vanguard said.
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