One more Fed hike? Pimco sees an elevated chance

investmentnews.com:

Markets may be underestimating the risks of both a US recession and one more interest-rate hike from the Federal Reserve, making haven assets a preferred play, according to Pacific Investment Management Co. 

There’s “still a fairly elevated chance of another hike before the year end,” Geraldine Sundstrom, a money manager in London, said in an interview Tuesday. “Higher for longer” is likely the mantra for US rates as “inflation will remain a little bit stickier than expected.”

Sundstrom’s view comes as Treasury yields climb back to their highest since 2007, thanks to a renewed rise in oil prices and a growing recognition the Fed may keep rates elevated until inflation returns to acceptable levels. But traders are still pricing in less than a 50% chance of a rate hike by December, underscoring division on the Fed’s moves to date will be sufficient to subdue the hottest prices in a generation. 

Yields on 10-year Treasuries held around a 16-year high in Asia trading Wednesday. 

Sundstrom, a 27-year investment veteran who previously worked at hedge fund giant Brevan Howard, says Treasury yields are likely to remain range-bound in the near term. She expects the Fed to keep rates on hold at its policy meeting Wednesday. 

The portfolio manager helps oversee a number of strategies at Pimco, including a dynamic multi-asset fund that has lost 4.5% this year amid a “complicated year in equity relative value” bets, she said. She also helps manage the global core asset allocation fund which has gained 5.4%, according to data compiled by Bloomberg.

Sundstrom is “a little bit less sanguine than the market” on US economic growth, adding that a recession remains a coin toss even as calls for a gentle slowdown grows. A “soft landing is