Bets on ‘Year of the Bond’ Persist in Face of Still-Hawkish Fed

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.

Brandywine Global Investment Management, Columbia Threadneedle Investments, and Vanguard Group Inc. are keeping the faith that a rousing fixed-income rally is coming, a stance that is being sorely tested by the economy’s resilience and the Federal Reserve’s eyeing of higher interest rates.

Other market-watchers aren’t so sure: JPMorgan Chase & Co. strategists last week ditched a recommended long position in five-year Treasuries

It was supposed to be a banner year for fixed income amid assumptions the Fed would be pivoting to cutting rates by now, unleashing a ferocious rally that would erase some of the historic losses of 2022.

But a solid job market and sticky inflation spoiled that narrative, burning the bets that monetary policy would be eased.

As a result, the average bond manager has seen only a modest rebound in 2023, buoyed mostly by income from some of the highest yields in years, leaving the steadfast bulls to bide their time until the economy falters.

'Year of the Bond' Fails to Live Up to Expectations | Benchmark index returned 2.1% this year through June