Bob Michele, JPMorgan Asset Management's global head of fixed income, believes the bond market has reached a "maximum pain" point. He announced that his team has begun acquiring long-end US, Japanese, and Australian bonds, deeming their current prices "simply too cheap." This sentiment suggests a potential turning point for these bond markets after a period of significant stress.
This move by JPMorgan comes amidst a broader selloff in Treasuries. On September 28, 2026, yields on rate-sensitive US two-year bonds increased by five basis points to 4.90%, and the 10-year yield climbed four basis points to 5.20%. Sovereign bonds in Japan, Australia, and South Korea also experienced declines. This selloff was fueled by rising oil prices, with Brent oil gaining almost 2% to $106.31 a barrel, and hawkish comments from Federal Reserve officials.
The context for Michele's bullish stance on long-end bonds contrasts with JPMorgan's general bearish view on US Treasury duration, though this bearish bias has recently weakened. Strategists noted that the short and belly sections of the US Treasury yield curve have realigned with fundamental drivers, providing some support for recent yield movements. The ongoing geopolitical situation, particularly involving Iran and its impact on oil prices, is a key factor influencing the bond market, with the Strait of Hormuz developments being pivotal.
The current market conditions highlight a potential inflection point, with some analysts, like Damien McColough of Westpac Banking Corp, pointing to hawkish Fed messaging and oil prices above $100 as primary drivers for the bearish sentiment. However, Michele's move to buy long-end bonds suggests a belief that the market's downturn in these specific assets is overdone. The yield curve has also been flattening, with the extra yield on 10-year Treasuries over two-year notes shrinking to 17 basis points, indicating increased concerns about a potential economic slowdown or recession.
