Bond market is a buy right now, J.P. Morgan Asset Management’s fixed income head says

J.P. Morgan Asset Management's head of global fixed income, Bob Michele, believes the bond market is an excellent time to invest right now. Michele asserts that there is a "generational amount of yield" in bond markets, with the potential for an 8% return in the US over the next year. The bond market has recently rebounded following recent sell-offs, particularly in developed-market sovereign debt.

Michele anticipates both the Fed funds rate and the Treasury curve to converge around 4.5% in the near future. As the Federal Reserve meets to discuss interest rate decisions, US 10-year yields are currently at 4.99%, having spent time above 5% in recent weeks. Michele points out that the buy signal from the US Treasury curve was evident when it first surpassed the 5% mark in the past, with a real yield of 3%, a low not seen since 2002.

Among the recommended areas to invest in bond markets are Japan, Australia, investment-grade credit, and emerging market sovereign debt. Michele argues that the global construction cycle and the low likelihood of a recession mean that investors should look for opportunities in credit spreads. The main tail risk, he warns, is that the Federal Reserve may need to hike interest rates much further than 4.5% to combat inflation.