With the era of zero interest rates nearing its close in the U.S., some analysts are beginning to worry that bonds on the short end of the yield curve may face a selloff.
“A lot of clients in Asia today are buying fixed income products with leverage. Many in the last couple of years have bought fixed income products but levered them up to enhance the return, because cheap money has been available from banks,” said Anuj Khanna, CEO for South Asia, at Pictet Wealth Management, which oversees around $446 billion in assets.
“As quantitative easing comes to an end, there is a risk in the coming months that the short end of the yield curve can spike. If that were to happen, interest rates will rise, which means that people borrowing to invest could suffer the double whammy of the borrowing cost going up and the price of bonds going down,” he said.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.