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The looming Fed lift-off and interest rate volatility: considerations for fixed income and EM Debt
01 July 2015
Interest rate normalisation in the US is coming and rate hikes are expected soon. This has hit investor sentiment but we argue that any weakness in asset prices should be seen as an opportunity to add to EM debt positions.
Leaving dovish/hawkish interpretations aside, the June Federal Open Market Committee (FOMC) had a clear message for investors: it is ready to start the process of interest rate normalisation as soon as the economy exhibits some signs of improvement from its first quarter lethargy. It may happen in September, December or even the beginning of 2016, but the ‘sword of Damocles’ will keep hanging over investors’ heads for some time and uncertainties will linger on over what happens when the first rate hike comes.
However, we argue that investors should not fear the looming hiking cycle as any weakness in asset prices should be an opportunity to add to positions. The full article is available on the link below.