Citigroup Inc.’s ultra-wealthy clients are plowing money into fixed income.

Family offices and rich clients have been snapping up bonds lately, said David Bailin, chief investment officer at Citi Global Wealth, which manages about $800 billion of customer assets. Bonds “deserve immediate attention” given expectations that 2023 will be one of the weakest years for global growth in the past four decades, the group said in a report Thursday.

“At the very highest end of the market, the family offices are very engaged in this — very engaged,” Bailin said in a roundtable with reporters. He said he was on the phone recently with a $1 billion client looking to buy bonds.

His firm expects a “mild” US recession next year, and fixed income potentially offers a port of refuge, especially short-duration Treasuries and short-term investment-grade corporates. The US unemployment rate could rise above 5% in 2023 with about 2 million jobs lost, according to the report. The rate as of November was 3.7%, according to the Bureau of Labor Statistics.

Despite the recent rally in equities, Citi doesn’t think the bear market for stocks is over.  “A new bull market has never begun before a recession has even started,” according to the report. “Most typically, a bull market begins at around the midway stage of a recession.”

Investors hunting for higher yields in the bond market will have a tougher time as fixed-income prices rally. US Treasuries are poised for their second straight month of positive returns, according to Bloomberg indexes. The yield on 10-year Treasuries has fallen to around 3.5%, compared with more than 4.2% in October.  Citi Global Wealth said it expects 10-year yields to drop and the yield curve to steepen on expectations for an economic recovery by the end of next year.

Investors are using six-month Treasuries as a “placeholder” until markets begin to price in an economic recovery, said Kristin Bitterly, head of North America investments at Citi Global Wealth.

“It’s one of the green shoots” of the market, she said. “It’s a big deal that bonds are a viable asset class now.” 

This article was provided by Bloomberg News.