Everyone Is Running. Amundi Is Buying.

The bond market is panicking. Oil is above $100. Treasury yields are back near 5%.

And just when everyone seems ready to run for the exits, Europe’s largest asset manager is doing something rather unexpected: buying U.S. Treasuries.

Amundi, which manages around $2.8 trillion in assets, has started building positions in two-year U.S. Treasuries — effectively betting that the Federal Reserve may not be able to keep raising rates for as long as the market fears.

That is quite a plot twist.

The current market story looks almost painfully simple. Oil prices are surging, inflation fears are back, borrowing costs are rising and Treasury yields are climbing.

The obvious trade? Higher rates, higher yields, stay away from bonds.

Amundi appears to be asking a very different question: What if the economy breaks before the Fed gets the chance to keep tightening?

Its portfolio manager Nicolas Dahan argues that the combination of expensive energy and rising borrowing costs could eventually put serious pressure on U.S. growth. With two-year Treasury yields already above 4.50%, the bonds are becoming more

attractive as a hedge against an economic slowdown.

In other words, the market may be pricing in “higher for longer” just as the economy starts whispering “how much longer?”

That is the bet.

And Amundi is not simply dipping a toe into the water. The firm is gradually closing short positions in developed-market bonds and extending duration as yields become more attractive.

For now, inflation is still the villain of the story. But if oil stays high and borrowing costs keep rising, the villain could suddenly change.

Today’s market is worried the Fed will raise rates too much. Amundi is betting the bigger problem may be that the Fed simply won’t be able to keep going.

The bond market may look like a disaster right now.

Or, as Amundi seems to see it, it may be starting to look like a bargain.