A prospect that might have seemed unthinkable just a couple short weeks ago is coming into view for bond traders: The potential for US Treasuries to post an annual gain for the first time since 2020.

Bond investors face the crucial decision of just how much risk to take in Treasuries with 10-year yields at the highest in more than a decade and the Federal Reserve signaling it’s almost done raising rates.

Across Wall Street, there’s growing relief that the Federal Reserve — at long last — may be done raising interest rates. But that doesn’t mean turbulence in the bond market will soon become a thing of the past.

Listen to Wall Street’s top economists and you’ll hear the same message again and again: The risk of a recession is fading fast. And yet, in the bond market, the traditional warning that a downturn is near — an inversion of the yield curve — keeps getting louder.

Some of the biggest bond managers are sticking to their bullish view on the market for US government debt, even as that trade looks riskier by the day.

This year’s top US bond managers agree that Federal Reserve interest-rate cuts are inevitable this year. The main debate they see is how deep the economic pain gets.

Daniel Ivascyn rode one big trade all the way to the top of the bond-market universe: speculative mortgage debt that he scooped up on the cheap in the wake of the great financial crisis.

The bond market humbled Wall Street’s best and brightest in 2022.

A bedrock of long-term investing, a portfolio split 60/40 between equities and high-quality bonds, is set for its worst monthly slide since the market meltdown in the early days of the pandemic.