(Bloomberg) -- The tagline from Wall Street was that 2023 was the year of the bond. Instead, fund managers are coming to terms with one of the toughest years...
-- The tagline from Wall Street was that 2023 was the year of the bond. Instead, fund managers are coming to terms with one of the toughest years ever.Lacy Hunt, Hoisington Investment Management Co.’s 81-year-old chief economist, who’s been analyzing markets, Federal Reserve policy and the economy for around a half-century, says it’s been the hardest of his entire career.
Last year’s steep losses were easier to explain to clients — everyone knows bond prices suffer when inflation is high and central banks are driving up interest rates. And without the Federal Reserve in the market buying bonds to hold down borrowing costs, the US’s massive deficits — and the ballooning issuance needed to plug them — now matter in a way they didn’t before.Hoisington’s Hunt and his colleagues constantly discussed whether to conduct a wholesale alteration of their favorable view on long-term debt, as their assumption that slowing inflation would curb yields failed to materialize.
“We have to respect the market technicals and see where this can wash out,” said Michele, who earlier this year predicted yields could come down as low as 3% across the curve by August. If yields on longer maturities go above 5.25% and the employment market stays firm, then it’s time to retreat for real, he said.
And even after the bond slump, there are still metrics that suggest investors can sit tight for longer. The so-called yield-to-duration ratio — a gauge of how much bond yields would need to climb to wipe out the value of future interest payments — is hovering around 89 basis points.Despite moving to shorter maturities, Mike Riddell, a portfolio manager at Allianz Global Investors UK Ltd., says he is still “very bullish bonds.
Jamie Dimon warns of the 'most dangerous time' for the world in decades, sounding the alarm on wars, soaring debt, and the Fed
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