Heavy-hitting investors are snapping up US government bonds with longer maturities, betting the pain in the Treasury market is nearly over and an elusive slowdown in the US economy may be on the horizon.
Money managers including Pimco, Janus Henderson, Vanguard and BlackRock are taking the plunge — a bold bet after a multi-month rout in bond prices that has repeatedly wrongfooted asset managers and sent the 10-year Treasury yield above 5 per cent this week for the first time since 2007.
The US economy is in strikingly rude health for now. Data this week showed an annualised growth rate of 4.9 per cent in the third quarter. But investors are starting to plot out what happens a little further down the line, especially as the jump in bond yields jacks up borrowing costs for companies, households and the government. If the long-awaited slowdown does bite, that should push bond prices back up.