Global Bond

US Bond Bears Are Hit

Bond bears:  Franklin Templeton and Loomis Sayles & Co., who had built up bearish positions on government securities are hit.

Ten year Treasury yields were as high as 3.26% in October 2018.  It is now around 2.2% as shown:

Fuss, the 85-year-old vice chairman of Loomis Sayles, is throwing in the towel on 4%.

“In October, I had thought for sure, here we go — even as the Trump administration will complain — the Fed will proceed with their game plan of moving interest rates up and the 10-year yield will top out at roughly 4%,” Fuss said Wednesday by phone. “That was, unless something went bananas with the trade war. Well, guess what?”

It went bananas.

As of the end of March, Michael Hasenstab had been loading up on interest-rate swaps in the $34 billion Templeton Global Bond Fund he manages in order to deepen an ultra-short exposure to duration, a measure of sensitivity to shifts in yields. The fund’s average duration has dropped every quarter for the past two years and stood at minus 2.21 years, according to filings.

Reference:

Bloomberg, Liz McCormick & Natasha Doff, 2019-05-31, “Bond Bears Chased Off as Dreams of 4% Treasury Yields Vanish”

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