Keep it short.
Uncertainty over the outlook for the U.S. economy and worries about the rising volatility in the bond market are prompting some investors to stay at the short-end of the curve when investing in debts.
One such investor is Japan’s Norinchukin Bank, which is investing in “very short-term” U.S. government debt, according to Bloomberg.
“Is the U.S. economy really recovering or is it still in the middle of a long period of stagnation?” Bloomberg quoted Shinichi Saitoh, senior managing director at the bank, as saying. “Depending on which of those two views holds sway, there’s a huge impact on interest rates.”
The emerging consensus so far among market pundits is that the Fed will start raising rates in September, though some economists such as Citigroup’s William Lee told CNBC the possible turmoil in the bond market that may arise from such a move may keep the policymakers from hiking rates.
One of those who expect rates to rise is BlackRock, which expects the Fed to raise short-term rates this year but not before September.
Norinchukin lends mainly to Japanese farmers and fishermen. It held around $523 billion of securities at the end of March, said Bloomberg.
Photo credit: 401(K) 2012 via Flickr