(Bloomberg) -- Bond investors may already be pricing in the peak of the US rate cycle as concerns about a downturn mount, according to Steven Major, global head of fixed income research at HSBC Holdings Plc. 

The Federal Reserve “is well served by keeping some hawkishness there,” the long-time bond bull told Bloomberg Television on Thursday. “Because if they appear that they’ve reached the peak, then financial conditions will loosen and the policy won’t work. So they need a couple more months of this.” 

Officials delivered their biggest increase to interest rates since 1994 earlier this month and Fed Chair Jerome Powell has said another big move is on the table as he and his colleagues try to clamp down on uncomfortably strong price pressures.

But concerns are mounting the US could be headed for a recession. Former New York Fed President Bill Dudley wrote a recession is “inevitable” within the next 12 to 18 months.

Speaking before lawmakers this week, Powell gave his most explicit acknowledgment to date that steep interest-rate hikes could tip the US economy into recession.  

Forwards data shows the 10-year US treasury yield around 3.23% in six months’ time. The measure was trading at 3.1% in Asia trading on Thursday.

“They’ve got the market perhaps where they want to,” he said. “The markets are smelling it already.”    

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