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Federal Reserve (Fed) to quell inflation, the sentiment towards this fixed-income category in general remains cautious. For instance, Laffer Tengler Investments chief investment officer Nancy
Federal Reserve (Fed) to quell inflation, the sentiment towards this fixed-income category in general remains cautious. For instance, Laffer Tengler Investments chief investment officer Nancy Tengler was quoted by Bloomberg as saying it is difficult to see a way clear to make a lot of money (in bonds), especially when real rates are negative. Similarly, Sean Darby, chief global equity strategist at Jefferies, says we are nowhere out of the woods in seeing higher bond yields going into next year, according Bloomberg. In tandem with the global trend, Malaysian bond yields could also face upward pressure. Maybank Kim Eng (Maybank KE) at present maintains its yield forecast for the benchmark 10-year Malaysian Government Securities (MGS) at 3.5% by end-2021. But the brokerage notes the upside risks to the forecast, given the volatile US Treasury and developed-market yields. The near-term dynamics on MGS is still heavily influenced by global inflation and rates outlook, with less emphasis on local factors for the time being, says Maybank KE fixed-income research head Winson Phoon. (Source: The Star, 2021) If the rate of inflation is expected to increase, would this increase or decrease the slope of the yield curve? Justify your answer with graph
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