This week's fund investment focus — bonds

US two-year bond yield nears recent high

1. After a significant increase in January, US Treasury bonds experienced a decline in February. The two-year US Treasury bond yield has approached 4.7%, only a step away from the recent high of 4.812%.

2. Even if future market pricing is more hawkish than the Federal Reserve, causing further bond price declines, the current strategy of holding short-duration bonds to maturity can still provide investors with decent returns at the current interest rates.

3. Investors may have the idea of reinvesting when bonds drop another 30 to 40 basis points, but the uncertainty of whether future market pricing will be more hawkish or dovish compared to the Federal Reserve remains. Locking in a two-year rate ahead of time at a decent interest rate is a good option.

Federal Reserve officials have turned hawkish.

1. Due to the recent resilience of the US economy and slower decline in inflation, Federal Reserve officials have come out to make hawkish statements. Presidents of the St. Louis Fed and Cleveland Fed have both expressed support for a 50 basis point rate hike at the March FOMC meeting, and raising the terminal interest rate to 5.25% to 5.5%.

2. Investors need to pay attention that both of the aforementioned Fed presidents do not have voting rights this year. Therefore, the importance of their hawkish statements is lower compared to moments when they had voting rights last year.

3. After the market prices in the Fed's stance, further market changes await further observation.

Related funds (selected based on criteria of bond type and investment theme of investment grade bonds, and top five performance in the past year).

$E Fund (HK) Select Bond Fund (HK0000311842.MF)$

$PIMCO GIS Global Bond Fund (IE00B11XZ210.MF)$

$PIMCO GIS Income Fund (IE00B7KFL990.MF)$

$BEA Union Investment Asia Pacific Investment Grade Bond Fund (HK0000334380.MF)$

$Franklin U.S. Government Fund (LU0496364232.MF)$

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