Thursday, May 30, 2024

Manage Your Liquidity Before U.S. Rate Cuts

Are you still waiting for more gains from investment after U.S. cuts rate? Well, this may not happen this time.

After the anticipated rate cut cycle in the second half this year, an unexpected outcome could occur for investors: the yield curve flattens instead.

Research by KTrade Securities explained a few factors. Real money investors may quickly adjust their investments by favouring longer-term bonds. Additionally, retail investors might prefer the higher yields of longer maturities over bank deposits or T-bills.

For investors, this means liquidity management would be vital. “While geopolitical tensions may tempt some to favour cash for safety, it could be less beneficial given the anticipated rate declines, which could reduce returns and increase reinvestment risks”, according to the research report.

Diversification in investment approach with fixed-term deposits and structured solutions to meet future withdrawal needs over the next five years would be beneficial, it suggested.

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