The plunge in U.S. Treasury yields proves that bonds trading against the trend is correct
Earlier this year, the market generally believed that long-term interest rates and inflation rates would rise sharply, and bond fund managers have achieved outstanding performance during the market reversal in the past few weeks.
After the rise in U.S. Treasury yields, star managers including Scott Minerd of Guggenheim Partners and Stephen Liberatore of Nuveen topped the industry rankings Plummet This week it was as low as 1.25%, while it was as high as 1.7% at the end of March.
The market has turned to believe that the global economic rebound will slow down soon and the Fed is unlikely to get out of control inflation.
“In the end, the market went too far before the recovery,” said Liberatore, Nuveen’s fixed income strategy’s chief portfolio manager. Since the end of March, its core impact bond management accounts have outperformed all peers.
“We are more likely to be less than 1% [on the 10-year] It’s not that we have to be much higher than 1.5% or 1.75%,” he said.
Two Guggenheim funds managed by Minard and his team According to Morningstar, they are also one of the five best-performing intermediate bond funds since the end of the first quarter, with a total return of more than 4%.
At the beginning of March, when the 10-year Treasury bonds were still four weeks away from the peak and his fund suffered a disastrous defeat, Minerd, the global chief investment officer of Guggenheim, made a decision. The situation of contrarians.
“Today is a foregone conclusion, and long-term interest rates are on an uninterrupted upward trajectory,” he said at the time. “History tells us something different.”
Minard believes that large-scale stimulus by the government and central banks will eventually lead to accumulation of savings, which will eventually find a place in the financial market and depress the yields of U.S. Treasuries.
His fund performed well this year, ahead of the Bloomberg Barclays US Aggregate Index, which is the main fixed-income benchmark for investors. Since the beginning of April, the composite index has rebounded by 2.6%, and the total return so far in 2021 is negative 0.8%.
The steady decline in yields since the start of the second quarter accelerated sharply this month, and market participants attributed it to hedge funds and other momentum-oriented traders who liquidated short positions, and these traders turned their bets on them.
PGIM Total return bond fundManaged by Robert Tipp.. After a difficult first quarter, it rebounded 4.15% and is now ahead of the benchmark because he still firmly believes that long-term Treasury bonds are falling.
“The market is counting on the Fed’s dovish contingency measures,” Tip said, who will allow the economy to overheat, push up inflation and reduce the value of long-term bonds. He said that last month, when Fed officials opened the door for interest rate hikes in 2023, this statement stalled, earlier than previously expected.
Mark Lindblum, who manages Western Asset The Core Plus Bond Fund responded to this view. He said: “We don’t believe that the Fed will sacrifice its credibility by curbing inflation in the 1980s today or in the future.”