Bond Investors Increase Safety Bets Amid Recession Fears Ahead of FOMC

Bond investors are preparing for a recession and the end of the Federal Reserve's tightening cycle by embracing the safety of U.S. Treasuries and shedding risky exposures in investment grade and high yield credit. The Fed is expected to raise interest rates by 25 basis points at its meeting this week to a range of 5.0%-5.25%, but may pause after that and possibly start lowering rates in the fall. Fund managers have remained either neutral on their risk stance, stuck to Treasuries and high-quality investment grade corporate bonds, or extended duration in their portfolios.