Where JPMorgan’s head of global fixed income is investing right now
It’s time for investors to start rebuilding their bond allocations, according to JPMorgan Asset Management’s Bob Michele. While the U.S.-Iran war and the surge in oil prices has investors concerned, the volatility shouldn’t keep them from building up their fixed-income exposure at a time when yields remain attractive, he said. In fact, the bond market has actually held up reasonably well this past week, said Michele, the firm’s chief investment officer and head of global fixed income. The 10-year Treasury yield has moved higher, but it has remained in the range it’s been in since September, between 3.9% and 4.3%, he noted. Bond yields move inversely to prices. Credit has also held in fairly well, with much of the concern focusing on private credit markets, he noted. As a result, he’s sticking with his call to move money into fixed income, especially for those who have been under-allocated for the past few years. “We’ve been buying the bond market. We view it as a great diversifier and counterbalance to the equity market,” Michele said. “It does give you a risk-off home, and we’ve been buying credit because we don’t forecast a recession on the horizon.” Investors have seen the equity portions of their portfolio balloon over the past few years as stocks rallied. Enthusiasm over artificial intelligence has pushed equities to record highs, with the S & P 500 gaining 16% in 2025 and more than 20% in both 2024 and 2023. While this year has seen more volatility in stocks, portfolios are still lopsided, Michele noted. “For me, having done this for a long time, I can’t remember both the institutional side and the wealth management side being so underweight and under-allocated to fixed income,” he said. Yet he’s starting to see that change, with many of those same investors now saying they are looking for opportunities in the bond market, he noted. “You see these constant inflows into various bond vehicles as they try to diversify from their equity exposure, which has appreciated quite a bit, or what they put into alternatives over the last couple of years,” Michele said. State Street also recently noted the uptick in bond ETF inflows, with $52 billion going into the funds in February. It was the second consecutive month of inflows above $50 billion, a first for the asset class, strategist Matthew Bartolini said in a Feb. 28 note. Where JPMorgan is investing Michele and his team are investing across the credit market, including investment-grade corporates and high yield. He has also added a lot of securitized credit, and is underweight Treasurys. “A lot of investors like to say credit spreads are tight,” he said. “I think they’re fair for the environment where we are, which is positive economic growth, a Fed that’s cut interest rates and a private credit market which has absorbed all the marginal borrowers that would have come to the public markets at this point in the cycle.” When credit spreads are tight, it means investors are getting less compensation for taking on credit risk. Michele specifically sees tailwinds ahead for agency mortgage-backed securities — pools of residential mortgages backed by the government and issued by agencies Fannie Mae, Freddie Mac and Ginnie Mae. The JPMorgan Mortgage-Backed Securities ETF (JMTG) currently has a 3.62% 30-day SEC yield and 0.24% net expense ratio. For one thing, the market has gone through a tremendous refinancing cycle and borrowers with low mortgage rates are not looking to refinance or move, he said. “That takes a lot of the call optionality out of the market. So the convexity is a bit better,” he said. He also believes the agencies will grow their portfolios beyond what has been expected. In January, President Donald Trump directed Fannie Mae and Freddie Mac to purchase up to $200 billion in agency mortgage-back securities, claiming the move would bring down mortgage rates. Michele thinks it’s possible they may even buy more. Banks could also ultimately be another big buyer, he said. “If you start to see deregulation of the banking system in the U.S. and suddenly they’re holding regulatory capital, which suddenly looks like excess capital, they could put some of that into the agency mortgages,” he said. In addition, emerging markets are attractive with their high real yields, Michele said. He likes Mexico, Columbia and Brazil in Latin America, as well as Hungary, Romania and Poland. “Suddenly you’ve got a portfolio that yields about 9%,” Michele said. “That’s a very high real yield in an environment where those central banks have done a good job managing growth and inflation, and you’ll likely see some easing come from them. So it’s markets like those that hold a lot of appeal for us.”
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