Is the Federal Reserve nearing the end of its rate-hiking cycle? The U.S. central bank is giving investors mixed messages. The Fed has recently paused its rate hikes and said it would keep interest rates between 5.25% and 5.5%.
However, Fed Chair Jerome Powell said at a press conference that another rate hike isn’t off the table. “We’re not confident that we haven’t, we’re not confident that we have” reached that sufficiently restrictive plateau, Powell said. “Inflation has been coming down, but it’s still running well above our 2% target.”
“A few months of good data are only the beginning of what it will take to build confidence,” he added.
What Wall Street Is Saying
So, what does Wall Street think? Ultimately, some industry insiders seem unconcerned. Reuters is reporting that “BofA Global Research no longer expects the U.S. Federal Reserve to raise interest rates.”
“We now think that the hiking cycle is over,” wrote BofA economists led by Stephen Juneau. BofA added that the Fed may “try to leave the door open for more hikes next year.” However, “there are diminishing returns to hawkish rhetoric when its policy choices lean dovish.”
Additionally, Goldman Sachs Asset Management’s Global Co-Head of Fixed Income Whitney Watson also thinks the hikes are in the past.
The “economy’s resilience has not stalled labor market rebalancing or revived wage and price pressures,” Watson wrote. This suggests “disinflation will progress… indicating that the Fed will likely keep its policy unchanged into 2024.”
Hitting the Middle of the Treasury Curve With BondBloxx ETFs
So, investors who believe the rate hiking cycle is nearing its end may want to consider U.S. Treasuries on the middle part of the curve. One option is the BondBloxx Bloomberg Seven Year Target Duration US Treasury ETF (XSVN). Another is the BondBloxx Bloomberg Ten Year Target Duration US Treasury ETF (XTEN).
XSVN and XTEN are two of eight duration-specific U.S. Treasury ETFs from BondBloxx that range in duration from six months to 20 years. The funds track a series of indexes that include duration-constrained subsets of U.S. Treasuries with more than $300 billion outstanding. They’re designed to track indexes that achieve target durations using U.S. Treasury securities instead of specific maturities or maturity ranges.
BondBloxx was launched in October 2021 to provide precision ETF exposure for fixed income investors. It launched its first ETFs In February 2022. Now, BondBloxx manages more than $2 billion in assets across 20 U.S.-listed ETFs.
For more news, information, and analysis, visit the US Treasuries & TIPS Fixed Income Channel.