Buzz Updates Higher rates mean ‘bonds are back’, says JPMorgan’s Michele
Buzz Update Higher rates mean ‘bonds are back’, says JPMorgan’s Michele
(Bloomberg) – Investors are finding value in bonds for the first time in a decade as higher interest rates make fixed-income securities attractive, according to JPMorgan Chase & Co’s Bob Michele.
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Yields on the Bloomberg benchmark aggregate bond index climbed to 4.7%, from 1.75% at the end of 2021, as the Federal Reserve embarked on an aggressive rate hike policy to fight against inflation. As the Fed shows signs of slowing its rate hikes, investors can expect more market stability, said Michele, chief investment officer for fixed income at the 2 asset manager. $5 trillion from JPMorgan, on Bloomberg Television’s “Wall Street Week” show.
“Every JPMorgan wealth management platform, every institutional client — they come to us, they put money in bonds,” Michele told host David Westin. “Bonds are back.”
Stocks barely moved during the week, with the S&P 500 losing less than 1%, down 17% so far in 2022. Bond yields rose with 2-year Treasury bills ending the week at 4.5329% and 10-year Treasuries at 3.8288%, an inverted yield curve that often signals a future recession.
A glimmer of hope making a recession less likely is the outcome of the midterm elections, with Republicans taking control of the US House of Representatives while Democrats hold the Senate, a situation that could hamper big policy changes in Washington, Michele said.
“When there are dramatic policy changes, you have to reassess everything in the markets and it becomes destabilizing,” he said. “If we know we’re going to have traffic jams, we can focus on reducing inflation and trying to avoid a recession and have a soft landing.”