On July 8th, Wu Meiyan, Director of Fixed Income Investments at Schroders Global Investment in Hong Kong, wrote that inflation data in the United States has been erratic since 2024, causing financial markets to be uncertain about the Fed's interest rate cut expectations, and even worried about the increasing possibility of the economy not landing. Currently, the interest rate market continues to show higher volatility than in the first quarter of this year, impacting the performance of the bond market. The key question for bond investors has been when and to what extent the Fed will cut interest rates. Wu Meiyan stated that instead of speculating on the timing of interest rate cuts, bond investors should use flexible investment strategies and control the risks brought by interest rate fluctuations through different types of bonds, which may be more appropriate for the current rapidly changing investment environment. Although there has been some volatility in inflation data in individual months in the US recently, Wu Meiyan believes that the overall US economy is still steadily moving towards a "soft landing." As the economy continues to grow, inflation is gradually slowing down. The Fed is still expected to cut interest rates this year, but the timing of the rate cut is delayed compared to market expectations. Currently, the scenario of the US economy not landing is not the basic prediction of Schroders global investment. Wu Meiyan also believes that the US will maintain a relatively high level of inflation, the labor market is not overheated, and the probability of the economy being stronger than expected is relatively low. However, financial market sentiments may become tense again with fluctuations in economic data. Therefore, bond investors must remain flexible in managing interest rate risks. From the perspective of a bond investment portfolio, as the US Treasury bond yield curve continues to be inverted, that is, short-term interest rates are higher than long-term interest rates, Wu Meiyan currently prefers short to medium-term bonds. In the current environment, assuming that interest rates will remain relatively high for a period of time, short to medium-term bonds will better control interest rate risks. Wu Meiyan stated that unless the US economy faces serious recession risks, forcing the Fed to cut interest rates significantly, prematurely increasing the maturity of bond holdings will lead to interest rate risks. Even if the pace of interest rate cuts in the US is not as expected by the financial markets, investors will still face relatively high interest rate risks that will affect overall investment returns. In addition, a US economic recession is not the current basic prediction. In addition to managing interest rate risks flexibly, investors should also diversify their investments in different types of bonds and expand into bond markets outside the US. In fact, since 2024, European corporate bonds have outperformed US corporate bonds. From a valuation perspective, Wu Meiyan believes that the valuation of US dollar bonds is relatively high at the moment, with credit spreads approaching long-term historical average levels, reflecting the diminishing space for additional return by further narrowing credit spreads. In contrast, investment-grade and high-yield bonds in the eurozone are more attractive as their credit spreads still have room to narrow, potentially bringing returns to investors. Most investment-grade bonds in the eurozone are issued by financial institutions, while other issuers include large luxury companies, real estate companies, and automakers. Among European real estate companies, Schroders Global Investment is optimistic about the European logistics industry benefiting from global trends, which have promising profit prospects. Currently, Schroders Global Investment prefers investment-grade bonds issued by European financial institutions, as their business activities are relatively diverse, have stable sources of income, and are less likely to face liquidity risks similar to regional US banks. They also have higher credit ratings.