Amundi SA, Europe's largest asset manager, is buying two-year US Treasuries to insure against a potential growth slowdown driven by elevated oil prices. The US two-year yield recently climbed above 4.50% as traders increased bets on Federal Reserve interest-rate hikes. However, rising bond yields and energy prices pose risks to the resilient US economy.

Nicolas Dahan, a senior portfolio manager at the $2.8 trillion Paris-based firm, stated that above 4.50%, the two-year Treasury can serve as a hedge against this risk. Global bond markets have faced pressure from Middle East hostilities pushing Brent crude above $100 a barrel and persistent high debt levels. Germany's 10-year yield reached its highest since 2009 following another European Central Bank rate hike.

The 10-year Treasury yield remains near the 5% level, last seen briefly in 2007. Amundi had previously been short developed-market fixed income, favoring emerging markets, but is now slowly returning to long duration positions in developed markets. The yield dip to 4.96% on Monday followed a 19 basis point weekly climb.

This shift affects borrowing costs for corporates and sovereigns, including politically salient US mortgage rates ahead of midterm elections. Dahan suggested that central bank policy repricing and market capitulation could create opportunities similar to past hiking cycles.