Opponents of bonds claimed by the falling yield on the U.S. Treasury

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Bond fund managers, who reached a market consensus earlier this year that long-term interest rates and inflation were rising sharply, have been rewarded with large returns. during the market change of recent weeks.

Star executives, including Scott Minerd of Guggenheim Partners and Stephen Liberatore of Nuveen topped industry league rankings after US Treasury yields submerged as low as 1.25% this week, compared to a peak above 1.7% in late March.

Markets have come to the view that the global economic recovery will soon slow down and that the US Federal Reserve is unlikely to lose control of inflation.

“Ultimately, the market advanced too far ahead of the recovery,” said Liberatore, chief portfolio manager of Nuveen’s fixed-income strategies, managed accounts of major impact bonds have surpassed all of their peers since the end of March.

“We are more likely to go down 1 percent [on the 10-year] that we will have to be substantially above 1.5 or 1.75 percent, ”he said.

Two Guggenheim funds managed by Minerd and his team They are also among the top five bond yields since the end of the first quarter, according to Morningstar, with total yields above 4%.

In early March, when the ten-year note was still four weeks from its peak and its funds were receiving wear and tear, Minerd, Guggenheim’s chief investment officer, made the case for opposites.

“The conclusion lost today is that long-term rates are on a higher uninterrupted trajectory,” he said then. “History tells us something different.”

Minerd argued that the great stimulus from governments and central banks would ultimately result in accumulated savings, which would eventually find a home in the financial markets and bring down Treasury yields.

Its funds are now positive for the year and ahead of the Bloomberg Barclays US Aggregate index, the leading fixed income benchmark for investors. The aggregate has recovered 2.6% since early April, with a total return of 0.8% in 2021 so far.

A steady decline in yields since the beginning of the second quarter accelerated sharply this month, which market participants attributed to the liquidation of short positions by hedge funds and other momentum-oriented traders. whose bets had turned against him.

PGIM’s total return bond fund, led by Robert Tipp, has rebounded 4.15% after a tough first quarter and is now ahead of the benchmark as it stood firm in its view that long-standing Treasuries had fallen.

“The market was operating in a weak contingency in the Fed,” Tipp said, which would allow the economy to collapse, boosting inflation and reducing the value of long-standing bonds. That narrative stalled last month, he said, when Fed officials opened the door to raising rates in 2023, earlier than expected.

Mark Lindbloom, who directs the Western assets the core plus bond fund echoed this vision. “We don’t believe the Fed today, or in the future will sacrifice its credibility” of taming inflation in the 1980s, he said.

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