Amundi Buys 2-Year Treasuries as Yields Peak

Amundi SA increased its holdings of US 2-year Treasuries. The firm manages 2.8 trillion dollars in assets. This action marks a shift from previous short positions. The manager expects the Federal Reserve to stop raising rates soon.

US 2-year Treasury yields rose above 4.50 percent last week. This level is the highest since 2024. The 10-year yield reached 4.96 percent on Monday. It sits just below the 5 percent threshold. Global bond markets experienced significant selling pressure.

Energy Prices Drive Inflation Fears

Brent crude futures exceeded 100 dollars per barrel. Geopolitical conflict in the Middle East fueled this rise. Higher oil costs are pushing up inflation expectations. Borrowing costs are increasing across the economy. Mortgage rates in the US hit one-year highs.

German 10-year bund yields reached their highest levels since 2009. The European Central Bank continues to hike rates. Market participants expect further monetary tightening. These conditions create headwinds for economic growth.

Short-Dated Bonds Offer Value

Nicolas Dahan, a senior portfolio manager at Amundi, identified a hedging opportunity. He stated that yields above 4.50 percent make short-dated Treasuries attractive. These bonds are sensitive to interest rate changes. They reflect macro policy shifts early. The firm is unwinding short positions in this sector.

Amundi had previously avoided developed market fixed income. The firm focused on emerging markets with higher real rates. Core bond yields in the US and Europe are now high. This creates a historic trading opportunity. The company is extending its portfolio duration.

Fed Policy Pivot Anticipated

Market views on the Federal Reserve are divided. Some investors fear the central bank is too slow on inflation. Others believe tightening is nearing its limit. Dahan supports the latter view. He cites supply-side shocks and aggressive market pricing as catalysts. A policy inflection point may be close.

Corporate borrowing costs continue to climb. Housing affordability is becoming a political issue. Midterm elections add pressure on policymakers. The rapid rise in yields impacts the real economy. Amundi’s strategy assumes a change in direction from the Fed.