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...
FILE PHOTO: The logo for Vanguard is displayed on a screen on the floor of the NYSE in New YorkNEW 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.
On the credit side, Vanguard is optimistic on highly rated companies as it believes they continue to have strong fundamentals after they managed to either not borrow or to borrow short-term debt, avoiding higher funding costs for long.
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