Based on the latest treasury yield movements, investors are bracing for a recession. Yields on the benchmark U.S. 10-year Treasury note have fallen by around 83 basis points from their October high of 4.338% as investors sent $4.89 billion into U.S. bond funds last week. That marks the third straight week of net inflows. The bond rally comes after Treasuries had the worst year ever, driven by the Fed's tightening policy. The key driver for the current rally has been concerns over the Fed's rate increases sending the U.S. economy into a recession. Treasuries are typically seen as a safe haven during economic uncertainty. Investors expect the Fed to raise rates by another 25 basis points at the end of its monetary policy meeting today, while Wall Street is also looking for signs that the Fed will pull back on its hawkish stance amid falling inflation. Rob Daly, director of fixed income at Glenmede Investment Management told Reuters that "Things are coming off the boil here. There is a de-risking that's happening, and we're seeing flows out of equities into higher quality parts of the market such as fixed income." Although stocks have been rallying since late last year, investors are playing it safe, expecting the rally to end if a recession hits.
Finsum:While stocks have been in a mini rally since the end of last year, investors are playing it safe flooding U.S. bonds funds in the expectation of a recession.