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Amundi, Europe’s largest fund manager, said on Tuesday that it favoured moving back into beaten down sovereign bond markets as the economic growth outlook turns.

Amundi Group CIO Vincent Mortier said bonds had been hit by a perfect storm of rising inflation and interest rates that had pushed yields higher, but that the outlook was shifting as recession risks mount.

An energy crisis and uncomfortably high inflation suggest the growth outlook has turned globally.

“Markets are not totally pricing in recession risks, which are looming, in particular in Europe,” Mortier said. “We believe that when the recession risks start to materialise, central banks will act to make sure long term rates are not drifting up too much.”

In this context, U.S. Treasuries are offering a “good entry point,” he said.

Ken Taubes, Amundi chief investment officer, U.S., added that U.S. Treasuries did not have much more downside.

“Long-rates are near a peak and that is one reason why we have turned more positive,” he said.

The benchmark 10-year U.S. Treasury yield rose to 3.46%, its highest since mid-June, after data on Tuesday showed monthly U.S consumer prices unexpectedly rose in August. They have soared 195 basis points this year.

Amundi fund managers said they were also upbeat on emerging markets given a more positive growth outlook for China in 2023, but did not expect a reversal of U.S. dollar strength yet.

Amundi added that it had a neutral view on Ukraine regaining ground given territories that have been taken back from Russia.

Since Moscow abandoned its main bastion in northeastern Ukraine on Saturday, marking its worst defeat since the early days of the war, Ukrainian troops have recaptured dozens of towns in a stunning shift in battleground momentum.

“We are afraid that the war is not over, it will take time to find any kind of resolution,” Mortier said.

In Latin America, Amundi’s head of emerging markets Yerlan Syzdykov, said that Brazil is a “positive story” regardless of the outcome of a presidential election in October.

He expected no radical change of regime if candidate and former president Luiz Inacio Lula Da Silva beets incumbent Jair Bolsonaro, as recent polls show.

Syzdykov added that Amundi sees “a lot of stress” in middle-income countries that are in talks to restructure their debt such as Ghana and Zambia.

“At the end of the day, emerging markets are always going through these boom-and-bust cycles,” he said.

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