Unafraid of bond market turmoil! Leading asset management giants firmly support US bonds: 10-year yield rate about to peak.

Global asset management giant Vanguard Group continues to bet on US Treasury bonds, believing that the yield on the 10-year US Treasury bonds has approached the upper limit of their expected range in the $31 trillion US bond market. Sara Devereux, head of global fixed income business at Vanguard Group, stated before the release of the company's latest outlook report: "In the US interest rate market, we maintain a bias towards longer duration allocations, as the current yield on the 10-year US Treasury bonds has approached the upper limit of our expected range." The outlook report will be released later this week. As concerns about rising oil prices and accelerating inflation exacerbate worries about the possibility of borrowing costs remaining high in the long term, US Treasury bonds are under pressure again. Following the worst weekly performance of the year, US Treasury bond prices continued to decline on Monday: the yield on the 10-year US Treasury bonds briefly exceeded 4.63%, reaching an intraday high since February last year; the yield on the 30-year US Treasury bonds further surpassed 5.1%. The bond markets in the UK and Japan also faced sell-offs. Vanguard Group, with assets under management of about $12 trillion, stated, "Persistently higher than targeted inflation and improved labor market prospects have led us to slightly raise our expectations for the monetary policy path and increase the likelihood of the Federal Reserve keeping rates unchanged before the end of the year." The institution added that the prospects for future accommodative policies are "more limited and more lagging." Since the outbreak of the Middle East conflict nearly three months ago, the benchmark 10-year US Treasury bond yield has risen from below 4%, as the market has completely dispelled expectations of a rate cut by the new Federal Reserve chairman, Kevin Wash. Traders currently anticipate a 25-basis-point rate hike by the Federal Reserve before March 2027, and believe there is a high probability of a rate hike in December this year. Vanguard Group believes that increased investment in artificial intelligence may ultimately increase economic productivity, promote economic growth, and help alleviate inflation. However, at present, the company stated that supply shocks and investment-driven demand continue to drive up inflation, and the company is closely monitoring signals of efficiency improvements in the overall economy. Vanguard Group's baseline forecast is that the US economy remains resilient, but the prolonged duration of the Iran conflict, rising geopolitical risks, and supply-side inflation pressures may negatively impact the economic outlook. Vanguard Group also warned that if the returns on investments in artificial intelligence are lower than expected or take longer to materialize, economic growth may weaken over time. Vanguard Group also revealed other interest rate strategies, including: - Regarding overseas bond markets, as the tightening pace of Japanese monetary policy lags behind inflation pressures, Vanguard Group maintains a short duration allocation for Japanese bonds, bets on the flattening of the Japanese bond yield curve, and underweights the Japanese yen; - In terms of cross-market relative value trading, going long on German government bonds and shorting US government bonds, as expectations for relatively strong mid-term US economic performance have already priced in the US bond market, while expectations of the European Central Bank tightening monetary policy have been already digested by the market; - In US mortgage loans, moderately overweighting US mortgage loans at normal levels of the economic cycle, positioning in hybrid adjustable rate mortgages, mortgage-backed securities, non-agency residential mortgage-backed securities, while reducing overweight positions in commercial mortgage-backed securities; - In the credit sector, Vanguard Group stated that "trend growth, strong corporate fundamentals, and the neutral to supportive policies of the Federal Reserve" support "constructive prospects for risk assets." The company plans to "continue to overweight credit and take advantage of trading opportunities within the range."