Bob Michele, Chief Investment Officer at JPMorgan Asset Management, stated that his team has begun purchasing long-dated government bonds in the United States, Japan, and Australia, arguing that current prices are "simply too cheap" and that the bond market has hit an "extreme pain" threshold.

In a Wednesday interview with Bloomberg Television, Michele noted that multiple bullish factors are converging. A sequence of central bank actions, starting with last week's interest rate hike by the European Central Bank, moving through the Federal Reserve, and culminating in the Bank of Japan's policy move this Friday, will form significant support for the bond market.

Meanwhile, with midterm elections approaching and the situation in the Middle East potentially stabilizing, geopolitical risks could gradually cool down.

Treasury Secretary Scott Bessent's buyback program for long-dated bonds was launched last month. Michele views this as a key force for market stabilization, pointing out that Bessent "still has ample ammunition to increase his efforts if he is willing."

Oversold Long End Signals Yield Peak

U.S. Treasuries have recently experienced significant selling pressure, with yields on the 10-year and 30-year bonds climbing to multi-year highs before the Fed's Wednesday rate hike announcement. This hike marks the Fed's first action since 2023.

Michele believes the sell-off at the long end of the yield curve has been severely overdone. He noted that the rapid surge in long-end yields "highlights the market's concern over the Fed's current loss of control," and this rate hike helps Fed policymakers "reassert command of the situation."

In his view, "the dominoes have begun to fall." The policy linkage from the European Central Bank to the Fed and then to the Bank of Japan forms a complete logical chain supporting the bond market.

Bessent's Buyback Program Acts as Stabilizing Anchor

Treasury Secretary Bessent's long-dated bond buyback program, launched last month, is seen by Michele as an unignorable stabilizing force amid current market volatility.

Michele emphasized that Bessent "has abundant ammunition and can increase his efforts if willing," suggesting there is still room in the policy toolbox.

The existence of the buyback program provides technical support for long-dated bonds at the supply-demand level, helping to alleviate previous selling pressure. Combined with the gradually clarifying central bank policy path, Michele believes the allocation value of long-dated bonds has become significantly prominent.

Unlike many market observers who remain on the sidelines, Michele said his team has already taken action, beginning to buy long-dated government bonds in the U.S., Japan, and Australia. In his view, current prices are "simply too cheap," and the market has reached an "extreme pain" point.

This phrase typically signals the concentrated release of pessimistic sentiment and a potential turning point.