This outlook on rates is far from universal: Amherst Pierpont Securities LLC and Goldman Sachs Group Inc. are among firms anticipating a Fed hike in the next two years, though the median expectation in a Bloomberg survey is for no change. The consensus for U.S. yields is for a steady, albeit modest, drift higher, even if inflation isn’t expected to budge much above 2%.

Traders see the Fed’s next move as a cut, potentially by the end of 2020. Fed officials, for their part, are signaling policy is likely to be on hold.

Western Asset Management Co. agrees that the Fed’s 2019 rate cuts are unlikely to be undone soon, though its forecasts don’t go as far out as 2028, says portfolio manager Julien Scholnick.

The firm, which manages $453 billion in mostly fixed income, is positioning for a Fed that stays on hold even if the economy improves and inflation drifts up to 2%—by taking a “barbell approach” favoring 2-, 5- and 30-year Treasuries for now.

Those maturities should see limited sell-offs with front-end yields pinned around current levels during the Fed’s pause at a 1.50%-1.75% fed funds rate target, even if growth accelerates, Scholnick said. And he sees little catalyst for long-dated yields to climb absent meaningful inflation.

Scholnick helps manage the $31 billion Western Asset Core Plus Bond Fund, which returned 11.7% in the past year, outpacing most competitors.

For Western Asset, in Pasadena, California, a U.S. recession isn’t the most likely outcome, although the median forecast in the latest Bloomberg survey has one starting in 2021. But Scholnick says a decade without a Fed hike can’t be ruled out if a downturn hits.

“We’re in a low-growth and low-inflation environment not only here but on a global basis, and we don’t think Fed officials are going to be reversing what they’ve done with rate cuts over the next year,” he said.

This article was provided by Bloomberg News.

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