The US Federal Reserve's key rate cut has pushed US bond yields lower. Having started September at around 4.3%, the 10-year yield ended at around 4.1%.
Investors, therefore, remain convinced that the Fed has sufficient room to manoeuvre to continue easing its monetary policy without allowing inflation to rebound.
Another factor has also contributed to this decline in the yields the United States must offer to finance itself: US debt, considered the ultimate risk-free asset, has benefited from the shutdown, the paralysis of the US government due to a lack of agreement on financing new programs. The uncertainty thus created has prompted the most cautious investors to seek refuge in assets perceived as having lower risk.
At current yield levels, US debt remains a key component of our portfolios.
Long-term rates in the United States
The Fed's rate cut and the shutdown have helped push US bond yields back to their lowest levels seen in 2025.
Emerging currencies have been a hit
Emerging markets are among the primary beneficiaries when yields offered by US debt decline, a phenomenon we witnessed again this past month.
Indeed, falling US bond yields push investors to seek higher yields elsewhere, and emerging markets are ideally positioned to offer them. Naturally, their respective currencies are benefiting.
The South African rand, the Brazilian real, and the Mexican peso have all appreciated against the euro.
Generous in yields (and benefiting from the surge in gold, the other highly sought-after haven), these three currencies posted the best performances of the month. We invest in Brazil and Mexico as part of some of our portfolios.
Asian currencies continue to slide
The expected decline in US interest rates has slightly weakened the dollar against the euro. This is logical, as the yield differential between the two currencies (which is currently favourable to the greenback) will tend to narrow with the Fed on a downward trend and the European Central Bank adopting a more dovish stance.
However, it is the Asian currencies that have experienced the sharpest declines. At a time when Washington is imposing tariffs worldwide, the exchange rate with the US dollar is becoming important for this exporting region.
This is explained by the competitiveness of their products and the ability of their producers to absorb a portion of US tariffs, which depends on the value of their currency. Japan, South Korea, and many others, therefore, continue to allow their respective currencies to slide gradually.
Korean Won to Euro
Like many other Asian exporters, South Korea is allowing its currency to slide to maintain its competitiveness in global markets.