PT Manulife Aset Manajemen Indonesia assesses that the yield on US bonds has the potential to increase, but the movement is relatively limited.

Senior Portfolio Manager, Manulife Aset Manajemen Indonesia, Samuel Kesuma said the yield on US bonds could still move up in line with the improving US economy.

"However, we view that the increase will be more limited and gradual," he said in a press release, on Thursday (15/4).

Samuel assessed that the limited increase in US bond yields was triggered by the discourse of President Joe Biden's tax hike, the pace of recovery, which tends to be slower than expected in line with the risk of a third wave of Covid-19 in several regions, as well as the potential for increased purchases of US bonds by investors global as the yields have risen to attractive levels.

However, a more gradual increase in US bond yields will ease market concerns and may restore global investor sentiment.

"Currently, the US bond yield is still in the range of 1.7%, which is relatively low. This is because in the past 10 years the average yield on US bonds was around 2%, so the level of US bonds is still at a reasonable level and remains supportive of the financial market, "he explained.

At the end of 2020, US bond yields strengthened from the range of 0.9% to 1.7% at the end of March 2021. Rising inflation spurred this growth.

"In our view, the increase in US bond yields reflects the market's more positive expectations for economic growth. We do not see the threat of a prolonged surge in inflation in the US that will force the Fed to tighten monetary policy, "he said.