Global bond markets are entering a markedly bifurcated phase, with the U.S. Federal Reserve (Fed) easing while other major central banks lean toward further tightening, according to Eric Souders, portfolio manager, Payden & Rygel, who believes that emerging markets are in a stronger position than developed economies because of this.
Following last Thursday’s widely anticipated Fed rate cut, Souders says the bigger question is how quickly further rate cuts will follow.
“The market priced and called the cut last week and has predicted two more over the next 12 months. Our view is actually closer to four or five cuts,” he said. “We think inflation will continue to move lower, particularly as shelter inflation eases.”
Souders described the U.S. economic backdrop as “highly bifurcated”, reflecting a mix of cooling income-driven growth and strong structural tailwinds.
