Global bond markets are presenting a significant buying opportunity, with US fixed income investors potentially earning returns of 7% to 8% as elevated yields create attractive entry points, according to a report by Reuters citing J.P. Morgan AM.

Bob Michele, J.P. Morgan Asset Management's head of global fixed income, said a recent sell-off in developed-market sovereign debt had pushed yields to levels rarely seen in more than two decades. US 10-year Treasury yields were trading around 4.99% on Tuesday, having remained above 5% for much of recent weeks, while inflation-adjusted yields recently reached 3% for the first time since 2002.

J.P. Morgan expects the Federal Reserve’s policy rate and the Treasury yield curve to converge towards 4.5%, creating scope for bond price appreciation alongside income from elevated yields. Michele identified Japanese and Australian government bonds, investment-grade credit and emerging market sovereign debt as particularly attractive opportunities.

The outlook also supports opportunities for credit and fixed income managers, with Michele arguing that a global capital expenditure cycle makes a recession unlikely and provides scope to increase credit exposure during periods of spread widening. However, he cautioned that a sustained rise in inflation requiring the Federal Reserve to raise rates significantly beyond 4.5% remains a key risk to the outlook.