JPMorgan's Michele More optimistic on Treasuries

by Masaki Kondo

Treasuries may have hit the bottom for now amid signs of robust foreign demand and expectations for the Federal Reserve to support US government debt when needed, according to JPMorgan Asset Management.

“I feel pretty good that we’re putting in a low in price and a high in yield here,” Bob Michele, the firm’s global head of fixed income, said in a joint interview on Bloomberg Television. “In our conversations with overseas investors, they’re not being shaken out of Treasuries.”

Michele’s comments came after Treasuries suffered their biggest slump since 2001 last week, as President Donald Trump’s sweeping global tariffs and unpredictable policy making weakened demand for the longstanding safe haven during financial turmoil. The escalating trade tensions add to existing concerns about already-bloated US deficits that could swell further with the Congress debating tax cuts.

The 2.4% selloff in US sovereign bonds last week prompted speculation of China, the second-largest foreign holder of Treasuries behind Japan, selling the securities in retaliation to US tariffs, while a heavyweight in Japan’s ruling party ruled out using the debt holdings as a negotiation tool.

Michele cited Fed data showing foreign central banks and reserve managers recently boosted their holdings of Treasuries. He also pointed to Boston Fed President Susan Collins’ latest comment that the US central bank “would absolutely be prepared” to help stabilize financial markets if conditions become disorderly.