JPMorgan, Western AM See Treasury Gains Even as Bonds Swoon

JPMorgan Chase & Co. and Western Asset Management are among those saying this month’s jump in bond yields represents a buying opportunity, given central banks are getting close to the end of their rate-hike cycles.

“Looking ahead six to 12 months, we think the stage is set for global bonds to outperform,” Robert Abad, product specialist at Western Asset Management, wrote in a note. “The most opportune time to invest in a country’s fixed-income market is when its interest-rate cycle is stabilizing or poised to decline.”

Buying the Treasuries Dip

Some investors are piling into Treasuries and other major bond markets even as resilient economic data spur central banks to signal a willingness to add to rate hikes and then maintain higher borrowing costs for an extended period. Bloomberg’s global benchmark for government debt fell this month to deliver a year-to-date loss as longer-dated yields from the US to Australia approached multi-year highs.

A boost in Treasuries issuance, along with Fitch Ratings’ decision on Aug. 1 to lower its credit rating on the US on concerns over swelling government deficits, helped derail investor hopes that the worst was behind bonds this year. Nuveen Asset Management said in a note dated Monday that monetary policy is more important for bonds and that the extra supply of Treasuries is likely to meet sufficient demand.

“We don’t think the US will struggle to find buyers for Treasury securities,” said Saira Malik, chief investment officer of Nuveen. “Treasuries still represent the world’s largest, most liquid core fixed income market.”