Key Takeaways
- • J.P. Morgan Asset Management sees US fixed income investors potentially earning returns of 7% to 8%, according to a Reuters report citing J.P. Morgan AM, as elevated yields create attractive entry points.
- • Bob Michele, head of global fixed income at J.P. Morgan Asset Management, said a recent sell-off in developed-market sovereign debt pushed yields to levels rarely seen in more than two decades.
- • US 10-year Treasury yields traded around 4.99% on Tuesday after remaining above 5% for much of recent weeks, while inflation-adjusted yields recently reached 3% for the first time since 2002.
- • J.P. Morgan expects the Federal Reserve's policy rate and the Treasury yield curve to converge toward 4.5%, creating scope for bond price appreciation alongside income.
- • Michele named Japanese and Australian government bonds, investment-grade credit and emerging market sovereign debt as particularly attractive, while flagging a sustained inflation rise forcing Fed hikes well beyond 4.5% as the key risk.
Summary
J.P. Morgan Asset Management says global bond markets now present a significant buying opportunity, with US fixed income investors potentially earning returns of 7% to 8% as elevated yields create attractive entry points, according to a Reuters report citing J.P. Morgan AM.
Bob Michele, head of global fixed income at J.P. Morgan Asset Management, said a recent sell-off in developed-market sovereign debt had pushed yields to levels rarely seen in more than two decades. US 10-year Treasury yields were trading around 4.99% on Tuesday, having remained above 5% for much of recent weeks, while inflation-adjusted yields recently reached 3% for the first time since 2002.
J.P. Morgan expects the Federal Reserve's policy rate and the Treasury yield curve to converge toward 4.5%, which would create scope for bond price appreciation in addition to income from elevated yields. Michele identified Japanese and Australian government bonds, investment-grade credit and emerging market sovereign debt as particularly attractive opportunities.
The outlook also supports opportunities for credit and fixed income managers. Michele argued that a global capital expenditure cycle makes a recession unlikely and provides scope to increase credit exposure during periods of spread widening. He cautioned, however, that a sustained rise in inflation requiring the Federal Reserve to raise rates significantly beyond 4.5% remains a key risk to the outlook.
Bob Michele, head of global fixed income at J.P. Morgan Asset Management, said a recent sell-off in developed-market sovereign debt had pushed yields to levels rarely seen in more than two decades. US 10-year Treasury yields were trading around 4.99% on Tuesday, having remained above 5% for much of recent weeks, while inflation-adjusted yields recently reached 3% for the first time since 2002.
J.P. Morgan expects the Federal Reserve's policy rate and the Treasury yield curve to converge toward 4.5%, which would create scope for bond price appreciation in addition to income from elevated yields. Michele identified Japanese and Australian government bonds, investment-grade credit and emerging market sovereign debt as particularly attractive opportunities.
The outlook also supports opportunities for credit and fixed income managers. Michele argued that a global capital expenditure cycle makes a recession unlikely and provides scope to increase credit exposure during periods of spread widening. He cautioned, however, that a sustained rise in inflation requiring the Federal Reserve to raise rates significantly beyond 4.5% remains a key risk to the outlook.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.