Bob Michele, a bond market veteran for more than four decades, predicts a 75% chance of a US recession over the next 18 months but thinks it’s priced in.
“Clients are returning to the bond market, especially corporate bonds,” Michele, JPMorgan (NYSE: JPM) Asset Management’s chief investment officer, said on Bloomberg Television’s “Wall Street Week” on Friday. “It’s because they have renewed confidence in the central banks.”
Central banks worldwide are aggressively raising interest rates to tame stubborn inflation while trying to avoid tipping economies into recession. The European Central Bank increased rates this week for the first time in more than a decade. A Bloomberg survey of 44 economists conducted between July 15 and July 20 found expectations are that the Federal Reserve will hike 75 basis points again next week, then slow to 50 points in September.
With recession expectations at 75%, Michele said the market is “now fairly pricing in where they think the Fed should go. And the Fed is in sync with that. We’re talking about a Fed funds rate somewhere around 3.5% at year-end.”
The equity market, which posted its best week in a month, hasn’t fully priced in a recession over the next year, Erin Browne, multi-asset strategy portfolio manager at Pacific Investment Management Co., told Bloomberg Television. “The market is pricing basically stagnating growth,” she said. “I think it’s going to be negative growth.”
US 30 YR. T-BOND PRICE TECHNICAL ANALYSIS:
WEEKLY CHART
In the weekly charts, US 30 YR. T-BOND is trading in down channel. Currently it is moving below 20 & 50 MA.
RSI is in selling zone, which indicates bearishness.
Its immediate support is at 122.77 & the resistance is at 126.80
US 30 YR. T-Bond will trade in down channel until there is trend reversal.
US 30 YR. T-BOND PRICE TECHNICAL ANALYSIS:
DAILY CHART
In the daily charts, US 30 YR. T-BOND is has started moving in up channel. It is currently moving all the MA.
RSI is in buying zone, which indicates bullishness.
Its immediate support is at 125.14 & resistance is at 126.33
US 30 YR. T-BOND can continue to trade upside until any reversal.
