JP Morgan is bearish on some emerging market bonds, and it is unlikely that a Fed rate cut will stimulate a surge of capital inflows.

On September 10, Morgan Stanley’s views on some emerging market sovereign bonds have turned cautious, and the bank believes that the Federal Reserve’s interest rate cut is unlikely to stimulate a large inflow of funds into bond funds. Strategists such as Simon Waever advise investors to short-term bearish on this asset class, boost cash levels in their portfolios, focus on investment-grade bonds rather than riskier bonds, or sell emerging market credit default swap indices. According to a report published Monday, the bank removed Nigerian, Argentina and Morocco bonds from a basket of prime bonds and included Mexico and Romania bonds, which have become “cheaper.” The forecast is partly influenced by expectations that the United States Intrerest Rate market is already digesting the economy’s soft landing. “A further decline in United States Treasury yields could be detrimental to risk appetite,” they said, adding that “it will take up to 12 months for money to move from money market funds to risky assets after the first rate cut.”