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“The markets can absorb the interest-rate hikes in the U.S., which are being discounted”

Dec 14, 2021

Redacción Mapfre

Redacción Mapfre

The U.S. bond market is already discounting three interest-rate hikes in 2022. Ismael García Puente, fund selector at MAPFRE Gestión Patrimonial, acknowledges that the market has been quite erratic in response to, for example, Jerome Powell's reelection or the appearance of the new omicron variant, “but now it believes the Fed will act quickly to prevent inflation from becoming an endemic problem for the economy.” And in fact, short-term interest rates have risen more than long-term rates, flattening the yield curve, while inflation expectations have remained stable. "If there are no surprises in terms of inflation, the market can absorb these three interest-rate hikes without a problem," he adds in his weekly talk on Negocios TV.

Monetary policy in Europe is also attracting attention. This Thursday, the European Central Bank (ECB) may determine what happens with the Pandemic Emergency Purchase Program (PEPP) and whether it finally ends this aid in March of next year. "We think it will expand the previous program it had been using to buy assets because the ECB wants to give itself a lot of flexibility due to the existing uncertainty." Of course, he warns, a situation may arise in which, for the first time in seven years, there are more bond issues than redemptions and purchases by the central bank, "and this can be dangerous, mainly for the periphery."

In the final stretch of the year, analysts are updating their forecasts. García Puente believes that in 2022 we will begin to see the effects of the arrival of Next Generation funds, "which may benefit European equities." As for sectors, he is betting on the real estate sector, for example, the German residential market, and on green energy, "the topic that we feel the most comfortable with.”

Alternative assets: portfolio diversification with these funds

Alternative assets: portfolio diversification with these funds

Alternative assets are a good way to diversify the portfolio, and MAPFRE knows it. Since 2018, the Group has worked to have greater exposure to this area and explore new investment opportunities: as of last year, €1.35 billion had been committed to this type of asset.

How do interest rates affect bonds?

How do interest rates affect bonds?

Fixed income is shaping up to be "the star asset" this year, although uncertainty regarding interest rate movements could put some investors off. Juan Nozal, fund manager of MAPFRE AM, explains how these movements impact bond prices and yields.

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