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GO LONG DURATION IN BOND PORTFOLIOS AS US RECESSION LOOMS -BCA

With tariffs set to take effect on April 9, Ryan Swift, chief bond strategist at BCA Research in Montreal, recommends going long duration in fixed-income portfolios as he prices in U.S. recession by the end of the year.

Going long duration reflects expectations U.S. yields will fall further because the Fed will cut rates. The fed funds futures market has priced in about 90 basis points of cuts this year.

"I'm recommending going long bonds, or going above the benchmark portfolio duration," says Swift in an interview with Reuters.

"I don't view tariffs as sort of a bearish risk in the bond market, particularly at the long end of the curve. That brings us closer to recession, meaning long-dated yields have further downside."

BCA's base case is for the U.S. economy to hit recession in 2025 due in large part to the tariffs' negative impact.

"It may be even worse, because it will push up inflation in the near term, which means in the absence of tariffs, maybe the Federal Reserve should already be cutting rates here, but they're probably going to have to be slower than it would otherwise like to be because you're going to see higher inflation prints in the near term," Swift says.

Global banks have lifted U.S. recession odds following President Donald Trump's imposition of tariffs around the world. J.P. Morgan, for instance, late last week ramped its odds for a U.S. and global recession to 60%, from 40% previously, over the next 12 months.

Swift also points out that even with inflation expected to increase with tariffs, he doesn't think that U.S. Treasury Inflation Protected Securities $(TIPS)$ would be the right trade right now, given how the rise in prices has been largely been factored into the TIPS market.

"Those rates on the front end of the $(TIPS.UK)$ curve are really high," Swift notes. "They're already pricing in a pretty significant tariff impact there."

(Gertrude Chavez-Dreyfuss)

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