Analysis-Higher-for-longer rates regime pressures US recession trades

Bond investors who had positioned portfolios defensively in anticipation of a U.S. recession are adjusting their strategies for a surprisingly resilient economy that will likely keep interest rates higher, longer than they had expected. A so-called soft-landing economic path – in which the Federal Reserve manages to curb inflation without causing output to contract – has gained more consensus in recent weeks, prompting some investors to take on more risk or reduce bets that safe-haven assets such as Treasuries would rally. Felipe Villarroel, a portfolio manager at TwentyFour Asset Management, which specializes in fixed income, said he was shifting some allocations from 10-year Treasuries to 10-year U.S. investment-grade corporate bonds.