Earl Davis, head of fixed income and money markets at BMO Global Asset Management, is positioning his portfolio increasingly underweight on US 10-Year Treasuries as yields approach 3.90%. His contrarian stance suggests he believes current levels won't persist, signaling potential market corrections ahead as investors reassess rate expectations.

Davis's underweight strategy reflects confidence that the 10-year yield will decline from current levels. The move indicates BMO's expectation that the Federal Reserve's monetary policy trajectory may soon shift, potentially triggering lower bond yields across the curve. This positioning could provide relative outperformance if rates fall, particularly compared to other fixed income assets.

International capital flows represent a key factor influencing the longer end of the yield curve, according to Davis. Global investors' appetite for