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Market Extra: Fed dovish pivot may threaten Asian life insurers swimming ‘naked’ in U.S. corporate bond markets

Warren Buffett said “only when the tide goes out do you discover who’s been swimming naked”.

If the Federal Reserve’s recent move to possibly lower interest rates results in weakness in the U.S. dollar, yield-hungry life insurance companies in Japan and Taiwan that bought dollar-denominated bonds without hedging for currency volatility might want to keep that investing maxim in mind.

Despite their conservative reputations, some analysts say Asian life insurers ran up great risks in their search for income through their sizable “naked” bond positions, setting them up for pain when the greenback loses altitude.

Market expectations for the U.S.

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