According to Prudential Investment, the US bond market fluctuated significantly last week following comments from President Trump, and after signs of easing in US-China trade negotiations and indications from Federal Reserve officials about a potential rate cut in June, US Treasury prices reversed and rose. The yield on the 10-year US Treasury fell by 9 basis points to 4.235%.

In the corporate bond sector, last week saw investment-grade bonds rise by 1.0% while non-investment-grade bonds increased by 1.3%. Trump once again pressured the Fed to lower rates immediately, raising market concerns about the independence of the Fed, which deepened selling pressure in the bond market and led the 10-year Treasury yield to rise again. However, following Trump's more moderate comments regarding the aggressive timeline for rate cuts and an easing of tariff conflicts, buying activity returned to the bond market, resulting in a slight drop in the 10-year Treasury yield to 4.235%.

Although Fed officials have ruled out the possibility of a rate cut in May in public statements, they suggested that with more data being released, clearer economic direction could be discerned by early June, and adjustments to interest rates could be made at that time to ensure monetary policy remains on the right track. According to data from LSEG Lipper as of April 23, investors net bought $206 million worth of US bond funds in a week, ending a trend of five consecutive weeks of selling.

Prudential Investment indicated that the current US tariff policies have amplified the recent volatility in bond prices. As of now, the performance of investment-grade and non-investment-grade bond indices since the beginning of the year is 2.0% and 1.1% respectively, with the Bloomberg Global Bond Index, which consists of over 60% government bonds, rising by 5.1%, reflecting a cautious market sentiment.

Due to Trump's aggressive comments, the global stock and bond markets have experienced considerable volatility. Prudential Investment believes that in this environment of increased volatility, investment-grade bonds will help improve overall investment stability. With the Fed maintaining a loose monetary policy, and uncertainty regarding tariffs potentially creating headwinds against corporate profits, it is recommended to timely adjust the core allocation ratio of investment-grade bonds to reduce the volatility of the investment portfolio. In the non-investment-grade category, the default rate for US non-investment-grade bonds is projected to continue decreasing to 1.3% by March 2025, significantly lower than the 10-year average default rate of 2.7%. This reflects that strong corporate profits continue to strengthen bond quality, and it is believed that until default rates do not affect the economic structure, non-investment-grade bonds still have certain performance potential, which may rise along with risk assets after the turbulence caused by tariff policies settles.

This document is for illustrative purposes only and does not constitute an investment recommendation. The indices or stocks mentioned do not necessarily represent benchmarks of funds managed by Prudential Investment or positions held. Bond yields do not represent fund returns or distributions, and current yields do not predict future yields; fund net values may fluctuate due to market factors.