Bond bulls at JPMorgan, Allianz staying the course despite pain

investmentnews.com:

Convinced a recession in the US was near, some of the world’s most prominent money managers loaded up on government bonds this year in a bold bet that would atone for the punishing losses suffered in 2022. 

That strategy is now misfiring once again, saddling them with subpar returns and testing their resolve as the selloff deepens week after week.

The past week was especially painful. The annual return on US government bonds fell into the red as Treasury yields flirt with a 15-year high, reflecting the view that interest rates may be elevated for years to come — and that the economy will be able to sustain it.

And Treasuries began this week on the back foot once again with benchmark yields pushing higher in Asia trading Monday.

Bob Michele, one of the most outspoken bond bulls, is undeterred. The CIO for fixed income at J.P. Morgan Asset Management, who correctly predicted the slide in Treasury yields “all the way down to zero” from 2% in 2019, says now his strategy is to buy every dip in bond prices. 

The firm’s flagship Global Bond Opportunities Fund is down 1.5% over the past month and beating just 35% of peers so far this year, compared with 83% over the past five, according to data compiled by Bloomberg. 

Others in the same camp — among them Allianz Global Investors, Abrdn Investments, Columbia Threadneedle Investments and DoubleLine Capital — believe the economy is only just starting to absorb the impact of five percentage points of Federal Reserve rate hikes. A deeply inverted yield curve, an unfailing harbinger of recession, supports this view.

“We don’t think this time it’s different,” said Michele. “But from that first rate hike until recession could take a while. We continue to see a growing list of indicators