Fed to be in long pause mode; OBPPs offer wide choice of fixed-income investments, says Vishal Goenka of IndiaBonds.com

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Vishal Goenka, Co-Founder of IndiaBonds.com believes that the Fed will be in a long pause mode now and the long-end interest rates will be in a 4.50-5 per cent range. In an interview with Mint, Goenka said with the advent of regulated Online Bond Platform Providers (OBPPs), investors now have a wide choice of fixed-income investments. Edited excerpts: The recent surge in US yields was market acceptance of the fact that inflation is here to stay and interest rates will remain higher for longer.

So even though CPI numbers in the US saw highs of 9.1 per cent in June 2022 and the recent reading at 3.2 per cent, the US Fed kept increasing rates until the last meeting in October 2023. The surge in yields has been in the long end as rate hikes did not result in an economic slowdown or spike in unemployment rates, implying that the US economy may indeed see a soft landing. However, I do not see any imminent rate cuts in the US as inflation remains higher than the Fed-mandated target of 2 per cent with economic growth intact.

Hence, my view is that the Fed will be in a “long pause" mode now and the long-end interest rates will be in a 4.50-5 per cent range. (Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!) The total outstanding government securities market stood at ₹161.1 lakh crore (source: RBI) which is an increase of 7.1 per cent in FY24 from ₹150.4 lakh crore as of March 31, 2023.