Having started 2024 with the market pricing almost seven quarter-point policy rate cuts from the Federal Reserve (the Fed) this year, expectations are now for significantly fewer cuts, with some talk that there may not be any cuts at all. With other central banks still looking to move ahead with rate cuts of their own, we examine the potential impact on fixed income markets.

What does this mean for fixed income investors?

The market is currently pricing around two and a half rate cuts this year, which is less than the three cuts suggested by the Fed’s latest dot plot projections. In this environment, investors looking to take more tactical positions should be vigilant of the implications of economic data releases on Fed actions. The Fed has made it clear that it wants to cut, but given the strength of the data witnessed so far this year, a deep cutting cycle is looking unlikely unless there is a capitulation in economic growth, which the data is not currently suggesting. Opportunities may therefore arise looking globally in fixed income markets, where central banks have the capacity and willingness to cut policy rates. In the meantime, fixed income continues to provide optionality for investors, whether as a recession hedge or simply for attractive income.

About the Bond Bulletin

Each week J.P. Morgan Asset Management's Global Fixed Income, Currency and Commodities group reviews key issues for bond investors through the lens of its common Fundamental, Quantitative Valuation and Technical (FQT) research framework.

Our common research language based on Fundamental, Quantitative Valuation and Technical analysis provides a framework for comparing research across fixed income sectors and allows for the global integration of investment ideas.


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