Dollar down in choppy trading after data; Swiss franc gains following rate cut

NEW YORK – The dollar was down in choppy trading on Thursday after a host of US data indicated a relatively healthy economy, while the Swiss franc rose after the country’s central bank cut interest rates by 25 basis points (bps).

The greenback began paring losses after data showed US weekly jobless claims fell by 4,000 to a four-month low of 218,000, below the 225,000 forecast by economists polled by Reuters.

In addition, other reports showed corporate profits increased at a more robust pace than initially thought in the second quarter while gross domestic product grew at an unrevised 3%.

A gauge of new orders for key US-manufactured capital goods unexpectedly rose in August, although business spending on equipment appears to have waned in the third quarter.

“Looks like pretty good news for the dollar,” said Joseph Trevisani, senior analyst at FXStreet in New York.

“Once again we have this split between the Fed cutting rates and an economy that is essentially growing at 3% or more, so the market doesn’t quite know what to make of this.”

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.33% to 100.61 after rising as high as 100.95 in the session. The euro was up 0.34% at USD 1.117.

The Federal Reserve has recently signaled a shift in focus away from inflation and towards keeping the labor market healthy, but delivered a larger-than-usual 50-bp interest rate cut last week.

The market is completely pricing in a cut of at least 25 basis points at the Fed’s Nov. 6-7 meeting, with a 52.1% chance for another outsized half-percentage-point cut, according to CME Group’s FedWatch Tool.

SWISS RATE CUT

Against the Swiss franc, the dollar weakened 0.27% to 0.848 after the Swiss National Bank reduced interest rates by 25 basis points, echoing the moves by the Fed and European Central Bank (ECB), and left the door open for more rate cuts as inflation cools sharply.

Analysts at Goldman Sachs said the SNB cut was “motivated by lower inflationary pressure, driven, among other things, by a stronger franc” and expect a further 25-bp cut at the central bank’s December meeting given its dovish guidance and new inflation projections.

A slew of US central bank officials were speaking on Thursday, although several, including Fed Chair Jerome Powell declined to comment on monetary policy.

US Treasury Secretary Janet Yellen said labor market and inflation data suggest the US economy is on a path to a “soft landing,” but the “last mile” in the effort to tame inflation revolves around bringing down housing costs.

The Japanese yen strengthened 0.01% against the greenback to 144.72 per dollar. Bank of Japan policymakers were divided on how quickly the central bank should raise interest rates further, minutes of the bank’s July meeting showed, highlighting uncertainty on the timing of the next increase in borrowing costs.

Sterling strengthened 0.5% to USD 1.3391.

(Reporting by Chuck Mikolajczak; Editing by Paul Simao)

US yields rise as jobless claims unexpectedly fall

NEW YORK – US Treasury yields rose on Thursday after strong data, including an unexpected drop in jobless claims, led traders to cut bets that the Federal Reserve will make another 50-basis-point cut at its November meeting.

Initial claims for state unemployment benefits dropped by 4,000 to a seasonally adjusted 218,000 for the week ended Sept. 21. Economists polled by Reuters had forecast 225,000 claims for the latest week.

US economic growth also accelerated in the second quarter while gross domestic income growth was revised higher and the saving rate was raised.

“This morning’s data overall was pretty strong,” said Dan Mulholland, head of rates – sales & trading at Crews & Associates in New York.

“That put some pressure on the front-end of the market,” Mulholland added, saying that some unwinding of popular curve steepener trades and Treasury supply added to the move.

Traders are now pricing in a 51% probability that the Fed will cut rates by 50 basis points at the conclusion of its Nov. 6-7 meeting, down from 63% before the data, according to the CME Group’s FedWatch Tool.

Interest rate sensitive two-year yields were last up 6.8 basis points on the day at 3.621%.

Benchmark 10-year yields rose 0.8 basis points to 3.789% and earlier reached 3.821%, the highest since Sept. 4.

The yield curve between two- and 10-year notes flattened six basis points to 16.7 basis points. It reached 23.6 basis points on Wednesday, the steepest since June 2022.

The Fed is expected to prioritize the health of the labor market in its decision-making in the coming months as inflation recedes closer to its 2% annual target. A resurgence in price pressures, however, could disrupt the US central bank’s expected path of rate reductions.

The Fed last week kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction that Fed Chair Jerome Powell said was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.

Traders are still pricing in aggressive rate cuts going forward, with another 74 basis points of cuts expected by year-end, and 191 basis points in reductions by the end of 2025.

“The market is still, and has been, priced for more than the Fed suggests it will deliver, even in that ‘dot plot’ that was updated just a week ago,” said Zachary Griffiths, senior investment grade strategist at CreditSights in Charlotte.

Fed policymakers said last week they expect another 50 basis points in cuts this year.

“When we think about the balance of risk to yields, we see them as more skewed to the upside as it seems tough for the Fed to potentially deliver as much as the market is expecting,” Griffiths said.

Yields fell on Tuesday and odds of a larger rate cut in November rose after data showed that US consumer confidence dropped by the most in three years in September amid mounting fears over the labor market.

This week’s main US economic focus will be the Personal Consumption Expenditures index for August on Friday.

Inflation expectations have risen off their recent lows on some expectations that price pressures could move higher as the Fed cuts rates.

Five-year breakeven rates, which measure expected annual inflation over that time period, were at 2.06% on Wednesday, up from 1.86% on Sept. 10, according to data from the St. Louis Fed.

The Treasury sold USD 44 billion in seven-year notes on Thursday to solid demand, the final sale of USD 183 billion in coupon-bearing supply this week.

The notes sold at a high yield of 3.668%, around a basis point below where they had traded before the auction. Demand was above average at 2.63 times the amount of debt on offer.

The Treasury also saw decent interest for a USD 70 billion sale of five-year notes on Wednesday and a USD 69 billion auction of two-year notes on Tuesday.

(Reporting by Karen Brettell, Editing by Nick Zieminski and Will Dunham)

Roaring Chinese stocks set for best week in a decade

Will this week be Chinese President Xi Jinping’s equivalent of Mario Draghi’s famous “whatever it takes” moment?

Only time will tell if China’s volley of monetary, liquidity, and fiscal stimulus shots this week sparks a sustainable economic recovery, but the rally ripping through Chinese stocks suggests investors are willing to give Beijing the benefit of the doubt.

At the very least, downside risks to growth and inflation have been pared back. Remove the near-term pessimism, and the outlook is suddenly a lot brighter, regardless of the underlying fundamental and structural challenges China’s economy faces.

Couple that with a US economy still seemingly on track for a ‘soft landing’ and a central bank determined to get ahead of the curve to deliver that outcome, the global picture is a lot brighter too.

Risk assets around the world are responding accordingly. The MSCI World and S&P 500 both hit new highs on Thursday.

In Asia, Shanghai’s blue chip equity index is up 10.8% so far this week, which would be its biggest weekly rise since December, 2014. The broader Shanghai composite index is up 9.7%. A close at that level on Friday would mark its best week since November, 2008.

Hong Kong’s benchmark Hang Seng index’s 4% rally on Thursday brings its weekly gains to 9%, the most in 13 years. An index of mainland Chinese property stocks, meanwhile, leaped 16%.

The main potential brake on this momentum on Friday will be a wave of profit-taking ahead of the weekend, especially as it is coming up to the end of the quarter, and Chinese markets will be closed Oct. 1-7 for the Golden Week holiday.

While the euphoria and relief are understandable given how beaten down sentiment and asset prices were, a sense of caution is warranted.

Although Draghi’s “whatever it takes” commitment in 2012 to save the euro greatly reduced the risk of financial and political catastrophe – bond yield spreads have been lower ever since – the actual policies behind it didn’t fundamentally solve the euro zone’s severe economic problems.

Similarly, Beijing’s measures this week won’t fully solve China’s property bust, banish the threat of deflation, or address its long-term demographic challenges.

But that’s for another day. Or year.

The main Asian economic indicator on deck on Friday is Tokyo consumer price inflation for September, which is expected to show a fairly sharp slowdown in the annual core rate to 2.0% from 2.4%.

Minutes from the Bank of Japan’s July meeting on Thursday showed that policymakers were divided on how quickly interest rates should be raised again, highlighting uncertainty on the timing of the next increase in borrowing costs.

Here are key developments that could provide more direction to Asian markets on Friday:

– Tokyo inflation (September)

– Japan leading indicators (July)

– German unemployment (September)

(Reporting by Jamie McGeever; Editing by Bill Berkrot; Editing by Bill Berkrot)

Stocks decline, US bond yields rise; investors assess US rate outlook

NEW YORK – Global stock indexes mostly eased on Wednesday along with energy shares, while US Treasury yields rose as investors stuck to the view that the Federal Reserve will be able to create a soft landing for the US economy.

China’s yuan gave back earlier gains a day after China’s central bank unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back towards the government’s growth target.

In the US, Wednesday’s data showing new home sales falling in August had little impact on markets. Data on Tuesday showing US consumer confidence dropped by the most in three years in September added to worries about the labor market.

The US central bank last week began an anticipated series of interest rate cuts with a large half-percentage-point reduction.

Traders are now pricing in 59% odds of a 50-basis point cut at the Fed’s Nov. 7 meeting, up from 37% a week ago, and a 41% chance of a 25 basis point reduction, according to the CME Group’s FedWatch Tool.

“We’re seeing yields trend broadly higher, which is a little counter-intuitive at the start of the Fed cutting cycle,” said Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia.

Investors will be watching this week for US weekly jobless claims, due on Thursday, and the personal consumption expenditures price index, due on Friday.

On Wall Street, the Dow and S&P 500 ended lower, while Nasdaq was flat.

Energy led declines among S&P 500 sectors, falling 1.9% on the day, with oil prices also ending lower.

The Dow Jones Industrial Average fell 293.47 points, or 0.70%, to 41,914.75, the S&P 500 fell 10.67 points, or 0.19%, to 5,722.26 and the Nasdaq Composite rose 7.68 points, or 0.04%, to 18,082.21.

MSCI’s gauge of stocks across the globe fell 0.95 points, or 0.11%, to 843.61. The STOXX 600 index fell 0.11%

The dollar bounced off a 14-month low against the euro in choppy trading.

The euro was last down 0.41% at USD 1.1134 after earlier reaching USD 1.1214, the highest since July 2023. The dollar index rose 0.68% to 100.91. It earlier fell to 100.21, matching a low from Sept. 18, which was the weakest since July 2023.

The greenback gained 1.03% to 144.68 Japanese yen and reached 144.75, the highest since Sept. 3.

The dollar was last up 0.33% at 7.033 yuan in offshore trading. The Chinese currency earlier reached 6.9952, the strongest since May 2023.

In Treasuries, US 10-year yields last traded up 4.9 basis points at 3.784%. Since the Sept. 18 rate cut, 10-year yields have risen about 3 bps.

Oil prices declined as concerns about supply disruptions in Libya eased. US crude fell USD 1.87 to settle at USD 69.69 a barrel and Brent fell to USD 73.46 per barrel, down USD 1.71 on the day.

In other commodities, gold rose to a record high as expectations for another big rate cut by the Fed helped bullion’s rally. Spot gold gained 0.2% to USD 2,662.00 per ounce by 1750 GMT after hitting an all-time high of USD 2,670.43 earlier.

(Additional reporting by Tom Wilson in London and Gertrude Chavez-Dreyfuss in New York; Editing by Chizu Nomiyama, Richard Chang, Nick Zieminski, and Aurora Ellis)

Oil falls on easing Libya supply concerns, lingering China demand worries

NEW YORK – Oil prices slumped over 2% on Wednesday as worries over supply disruptions in Libya eased and demand concerns continued despite China’s latest stimulus plans.

Still, falling crude inventories in the United States and rising tensions in the Middle East provided some support.

Brent crude futures fell USD 1.71, or 2.27%, to settle at USD 73.46 a barrel. US West Texas Intermediate crude slipped USD 1.87, or 2.61%, to settle at USD 69.69 per barrel.

Libya’s factions signed an agreement on the process for appointing central bank governor, an initial step to resolve the dispute over control of the central bank and oil revenue that has slashed Libya’s oil output and exports.

“A pending resolution to Libya’s central bank crisis would restore significant oil supply, while US Gulf production outages are seen as very temporary,” said Clay Seigle, energy strategist.

A hurricane threatening the US Gulf Coast has changed course, toward Florida and away from oil and gas-producing areas near Texas, Louisiana and Mississippi.

Despite a slew of monetary support measures announced by China’s central bank on Tuesday, the boldest since the pandemic, analysts warned that more fiscal help was needed to boost activity in the world’s largest crude importer.

“Concerns lingered that more fiscal support would be needed to boost confidence in the Chinese economy. This uncertainty raised doubts about sustained demand growth, weighing on crude prices,” said George Khoury, global head of education and research at CFI Financial Group.

Oil prices rose by about 1.7% on Tuesday after China announced sweeping interest rate cuts and more funding.

Meanwhile, crude inventories in the US fell by 4.5 million barrels to 413 million barrels in the week ended Sept. 20, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 1.4 million-barrel draw. Gasoline and distillate inventories also declined last week.

“The trend of falling supplies is getting too big to ignore. We hear how bad demand can be and have mixed signals,” said Phil Flynn, an analyst with Price Futures Group. “The weakness of demand doesn’t fit with this falling inventory situation,” he added.

The intensifying conflict between Iran-backed Hezbollah in Lebanon and Israel also supported crude prices, with cross-border rockets launched by both sides increasing fears of a wider conflict.

Although Iran’s leadership has shown restraint, an attack is probably on the cards in order to save face, but without enraging its European allies and disrupting the main oil trade routes, said Achilleas Georgolopoulos, investment analyst at brokerage XM.

(Reporting by Nicole Jao and Laila Kearney in New York, Arunima Kumar in Bengaluru, Jeslyn Lerh in Singapore; Editing by Mark Potter, Kim Coghill, Elaine Hardcastle, and Jonathan Oatis)

Dollar rises from 14-month low, yuan dips

NEW YORK – The dollar bounced off a 14-month low against the euro on Wednesday in choppy trading, but investors held onto bets that the Federal Reserve will make another large interest rate cut at its November meeting on weakening labor optimism.

The yuan also eased on growing doubts about the impact of a new round of Chinese stimulus and after the initial rally on the news was seen as overdone.

The greenback tumbled on Tuesday after data showed that US consumer confidence dropped by the most in three years in September amid mounting fears over the labor market.

“The narrowing in the labor market differential, which is sort of indicative of demand and supply conditions in the employment market, was a very bad omen for the US economy,” said Karl Schamotta, chief market strategist at Corpay in Toronto.

“Markets are interpreting this as a sign that the Federal Reserve is very likely to deliver a second emergency-sized cut at its November meeting,” he added.

Data on Wednesday showed that sales of new US single-family homes fell less than expected in August.

This week’s main US economic focus will be the Personal Consumption Expenditures index for August on Friday.

China’s stimulus had earlier contributed to a stronger euro, with its resilience partly driven by a perception that a better outlook for Chinese demand could feed its way back through into Germany and through into Europe, said Jane Foley, senior forex strategist at Rabobank.

Despite weak German economic data and concerns about the French budget, the euro has held up “extremely well” against the dollar this week, she said.

France’s budget deficit risks overshooting 6% of economic output this year, the country’s new budget minister, Laurent Saint-Martin, told lawmakers in the National Assembly on Wednesday.

The Chinese yuan gave back earlier gains a day after China’s central bank unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back toward the government’s growth target.

The dollar was last up 0.33% at 7.033 yuan in offshore trading. The Chinese currency earlier reached 6.9952, the strongest since May 2023.

Riskier currencies including some in emerging markets that had rallied on the stimulus also pulled back.

“We are seeing a number of risk-sensitive asset classes essentially retracing from the levels that were reached in the aftermath of that announcement, and that’s really on the basis of a skepticism among investors as to whether the measures that were announced will succeed in boosting growth in the real economy,” said Schamotta.

The Australian dollar, which is viewed as a more liquid proxy for the yuan, also dipped on ebbing inflation in the country. Australian domestic consumer prices slowed to a three-year low in August, while core inflation hit its lowest since early 2022.

The Aussie AUD=D3 was last down 0.99% at USD 0.6823. It earlier hit USD 0.6908, the highest since February 2023.

In cryptocurrencies, bitcoin fell 1.41% to USD 63,324.

(Reporting By Karen Brettell; Additional reporting by Rae Wee and Linda Pasquini; Editing by William Maclean and Jonathan Oatis)

Gold smashes record peaks propelled by rate-cut momentum

Gold soared to a record high on Wednesday as expectations for another big rate cut by the US Federal Reserve bolstered bullion’s bull rally, and a softer dollar added to the metal’s appeal.

Spot gold gained 0.2% to USD 2,662.00 per ounce by 1750 GMT after hitting an all-time high of USD 2,670.43 earlier. US gold futures settled 0.3% higher at USD 2,684.7.

“I think we are still riding the wave of central bank easing, the likelihood of more to come, I think we’re also adding on to the expectations of a weaker dollar,” said David Meger, director of metals trading at High Ridge Futures.

The US dollar steadied to near 14-month lows against a basket of peers, making gold less expensive for overseas buyers.

The Fed cut rates by 50 basis points last week, and investors see about a 59% chance of another 50 bps cut in November, according to the CME FedWatch Tool.

Lower interest rates boost non-yielding gold’s appeal.

Traders await Fed Chair Jerome Powell’s remarks and US inflation data later this week for further policy cues.

“We could seen a USD 2,700 per ounce level in the next day or two if we continue to see weakening labor and if we see the Fed presidents all reaffirming 50 basis point cuts,” said Phillip Streible, chief market strategist at Blue Line Futures.

Bullion has risen over 29% so far in 2024, with gains attributed to central bank easing and geopolitical issues.

ETF flows and ancillary factors, including geopolitical tensions across the Middle East and the massive stimulus measures put in place by China, continue to support and drive gold prices higher over the course of the last several weeks and today, Meger said.

Spot silver fell 0.9% to USD 31.81 per ounce, having reached its highest levels since May earlier. Platinum added 0.8% to USD 993.10 and palladium shed 1.6% to USD 1,039.41.

(Reporting by Anjana Anil in Bengaluru, Editing by Nick Zieminski and Tasim Zahid)

Time out beckons as China stimulus boost fades

Asian markets could lose steam on Thursday following a sluggish performance on Wall Street on Wednesday, and as the sugar high from China’s biggest economic and market stimulus package since the pandemic earlier in the week shows signs of fading.

Higher US bond yields across the curve and the dollar’s biggest rise in a month should limit investors’ risk appetite. That one-two combo is certainly weighing on the Japanese yen, which goes into Thursday’s session in Asia at a three-week low near 145.00 per dollar.

The global growth and policy picture is pretty murky too, which may give investors pause. Weak US consumer confidence figures have revived doubts about the US “soft landing”, while the euro zone’s growth and inflation outlook seems to be softening by the day.

Economists at HSBC on Wednesday revised their European Central Bank forecasts, and now expect 25 basis point rate cuts at every meeting from October until April 2025. That would take the benchmark deposit rate down to 2.25%.

Weakness in the eurozone should ring alarm bells for China, given the strength of bilateral trade and financial ties. While Chinese stocks leapt another 1.5% on Wednesday to a fresh two-month high, they closed near the lows of the day.

Hong Kong stocks are on a roll – the Hang Seng is up 15% in just two weeks – and the MSCI Asia ex-Japan index is its highest since February 2022. Could both be ready for a time-out?

The euro’s slide and US bond yield spike, meanwhile, helped the dollar claw back some ground on Wednesday. Having earlier flirted with a new 14-month low, the dollar index rose 0.4% to post its biggest daily gain in a month.

The greenback struggled more against emerging market currencies though, and perhaps the most eye-catching move was by the Chinese yuan.

It continued its impressive rally of the last couple of months and rose for a sixth day against the dollar in spot trading, its longest winning streak since January last year. The offshore yuan, meanwhile, pierced 7.00 per dollar for the first time also since January last year.

Indeed, since the one-day burst of global market volatility on Aug. 5, China’s yuan has appreciated more than 3% against the US dollar, a remarkable run given how tightly Beijing manages the exchange rate.

Among the Asian economic indicators on deck on Thursday are manufacturing data from Thailand, industrial production figures from Singapore, and the latest snapshot of international trade from Hong Kong.

On the policy side, the Bank of Japan releases minutes of its July 30-31 policy meeting, and the Reserve Bank of Australia publishes its Financial Stability Review.

Here are key developments that could provide more direction to Asian markets on Thursday:

– BOJ minutes from July 30-31 policy meeting

– Singapore industrial production (August)

– Hong Kong trade (August)

(Reporting by Jamie McGeever; Editing by Bill Berkrot)

Middle East tensions, rate cut bets power gold to record high

Gold rose 1% and hit a record high on Tuesday, building on its recent rally as Middle East tensions fed its safe-haven appeal, while investors latched on to fresh cues for more US interest rate cuts.

Spot gold was up 1% at USD 2,654.39 per ounce by 1802 GMT after earlier hitting a record of USD 2,655.30. US gold futures settled 0.9% higher at USD 2,677.

Gold has risen over 28% so far in 2024, as fears of an all-out war in the Middle East escalated.

The current spike is being driven by a “flight to safety on Middle East concerns; that there’s going to be some renewed possible action by Iran … think we’ll continue to make another new set of highs,” said Bob Haberkorn, senior market strategist at RJO Futures.

Gold could go above USD 2,700, perhaps as soon as the end of this week, if we see a further Middle East escalation, and with talk of more rate cuts coming, Haberkorn added.

Israel struck Hezbollah targets in southern Lebanon and said it would keep up the pressure.

Bullion’s rally has also been propelled by the start of monetary easing by the US Federal Reserve, which reduces the opportunity cost of holding zero-yield gold, especially following the central bank’s larger-than-usual 50 basis point cut last week.

Adding to the momentum, Chicago Fed President Austan Goolsbee indicated he anticipates more cuts in the coming year.

Traders await Fed Chair Jerome Powell’s remarks and US inflation data later this week.

Investors also took stock of developments in top consumer China, with its central bank unveiling its biggest stimulus since the pandemic.

Major banks expect gold to extend its record-breaking price rally into 2025 because of a revival in large inflows to exchange-traded funds and expectations of additional interest rate cuts from prominent central banks.

Silver rose 4.7% to USD 32.12, platinum gained 3% to USD 984.95 and palladium climbed 1.6% to USD 1,058.50.

(Reporting by Anjana Anil in Bengaluru; Editing by Arpan Varghese, Susan Fenton, Shailesh Kuber, and Alan Barona)

US bond ETF launches up 50% from year-ago levels

Launches of bond-focused exchange traded funds have surged from year-ago levels in 2024, boosted by expectations of interest rate cuts by the Federal Reserve, according to data from CFRA and Strategas.

Nearly 120 bond ETFs have been launched so far this year, compared to 79 at the end of September 2023, data from Strategas showed.

The number of launches has spiked this month, with bond products making up 46% of all ETF debuts, according to CFRA. That compares to an average of about 20% of all launches throughout 2024. New products run the gamut, from those offering municipal bond exposure to others focused on high yields and collateralized loan obligations.

“There are some issuers out there realizing that fixed income is going to be a really big trend in general, and that there’s a unique opportunity to add a product to the market that would be a more creative alternative to the big, broad bond index ETFs,” said Todd Sohn, head of ETF analysis at Strategas.

A key factor driving interest this year has been anticipation that the Fed will cut interest rates in 2024 – a process that began with a 50 basis point reduction last week. Officials have penciled in another 150 basis points in cuts by the end of 2025, according to the Fed’s latest Summary of Economic Projections.

Falling interest rates are seen as beneficial to bonds, since they tend to push down yields, which move inversely to bond prices. Investors have also been eager to lock in yields near multi-decade highs before they fall.

The benchmark 10-year Treasury yield recently stood at around 3.75%, down from a high of just above 5% last October.

Issuers have also been encouraged by the growing inflows in bond ETFs. Average monthly net inflows into US bond ETFs have hit a record USD 25 billion this year, up from USD 17.1 billion in 2023, Strategas data showed. Inflows for September stood at USD 22.9 billion as of Sept. 20, according to Trackinsight, a Paris-based firm that monitors the global ETF industry.

The bond ETF space is dominated by iShares Core US Aggregate Bond ETF and the Vanguard Total Bond Market ETF, each with about USD 120 billion in assets. These two passive bond funds track the Bloomberg US Aggregate index and a float-adjusted version of that index, respectively. However, many of the newer funds in the sector, including a large proportion of this year’s launches, are actively managed, with managers picking what securities they believe are likely to outperform a benchmark.

“Fixed-income investors have a long-standing preference for actively managed products,” said Scott Davis, head of ETFs at Capital Group, noting that nearly 80% of all fixed-income mutual funds fall into that category. In contrast to mutual funds, ETFs are traded on a stock exchange throughout the day and offer instant liquidity.

One of the largest asset management firms to have made a push into ETFs over the last few years, Capital Group launched its USD 1.2 billion Capital Group Core Bond ETF in September 2023.

New products to debut in recent weeks range from the Rockefeller Opportunistic Municipal Bond ETF, which seeks long-term returns from an actively managed portfolio of munis, and the Congress Intermediate Bond Fund, and two suites of “longevity income” ETFs from Stone Ridge Asset Management targeted at retirees and promising reliable income for those over 80.

Signs of rebounding inflation or stronger-than-expected growth could curtail the outlook for how deeply the Fed cuts rates, potentially denting the funds’ returns.

For now, though, issuers are betting the trend in the sector is likely to continue.

Fixed income “has been the logical territory to pursue next, now that the equity index fund space and even active equity have become more crowded,” said Aniket Ullal, head of ETF research and analytics at CFRA.

(Reporting by Suzanne McGee; Editing by Ira Iosebashvili, Anna Driver, and Lisa Shumaker)

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