Strong U.S. employment data raises inflation concerns, overseas bonds become investment haven

■Sun Chengbao

Recently, the global financial market has continued to be affected by the interaction of employment data, inflationary pressure and geopolitical risks, and market volatility has increased significantly. The latest non-farm payrolls report in the United States was 162,000 in August, which was not only better than market expectations, but the data for the previous two months were also revised upward simultaneously, showing that the labor market is still resilient. On the other hand, the situation in the Middle East continues to be tense, crude oil supply risks are increasing, energy price fluctuations have added uncertainty to inflation, and the market is concerned that rising energy costs may once again push up global inflationary pressure. On September 16, the U.S. Federal Reserve (Fed) raised interest rates by 1 percentage point again for the first time in three years in order to curb inflation, raising the federal funds rate target range to 3.75% to 4%, while the U.S. 10-year Treasury bond yield is also hovering around 5%. As the high interest rate environment continues, the market will continue to pay attention to the impact of economic data, geopolitics and energy price trends on inflation.

The United States added 162,000 non-farm jobs in August, which was better than market expectations and shows that the labor market is still resilient. (AFP)

For bond investors, the current overseas bond investment grade bond yields are at a relatively high level in the past 15 years, providing investment opportunities for income distribution. Since overseas bonds can pay coupons in accordance with the contract conditions if the issuer does not default, rising yields mean that the interest rates that can be locked are higher. Although bond prices are under short-term pressure, it also means that new funds can enjoy more attractive prices.

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Make good use of overseas bonds to create regular cash flow and asset protection

The biggest feature of overseas bonds is that they have a regular dividend distribution mechanism, which can provide relatively regular cash flow. Investors can receive coupon income regularly during the holding period. If the issuer does not default, they can usually get back the principal amount of the bond if they hold it until maturity. Compared with the global stock market, which has accumulated a lot of gains driven by AI themes and corporate profits, some market evaluations have reached a relatively high level. If profit growth slows down or market sentiment changes in the future, the risk of volatility may increase. Therefore, overseas bonds with fixed income characteristics can not only pursue stable returns, but also be used as an important tool to diversify risks and strengthen asset portfolios.

In an environment where uncertainty in the global financial market is still high, investors can participate in the bond market through batch layout. On the one hand, they can lock in the current relatively high yield level, and on the other hand, they can grasp the potential capital gain opportunities brought by falling interest rates. In addition to pursuing returns, they can also add stability and defense to their investment portfolios.

(The author is senior deputy general manager of the Commodity Business Department of Fubon Securities)

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