Long-dated government bonds spent much of the year punishing investors, but rising yields are now luring them back. Ten-year US Treasury yields peaked at nearly 5.4% this month, their highest since 2002, while Japanese yields hit a 30-year high of 3.14%. Risk-free payouts near multi-decade highs are becoming difficult to resist, particularly with stocks looking expensive and volatile.
The comeback trade has enticed portfolio managers at JPMorgan Asset Management, Aegon Asset Management, Ninety One and Allianz GI. Yields are now in reverse, rewarding investors with a return of 2.2% in October on a gauge of global government bonds maturing in 10 years or more, a level that's handily beaten the flat performance of shorter-dated sovereign debt.
"The long-end just got too cheap and too unanchored," said JPMorgan Asset's head of global fixed income Bob Michele. He's been buying longer-dated bonds from Australia and Japan as well as US Treasuries. As investors question whether tech companies have overpromised on AI, government bonds are looking like a haven again.
Policy angst continues to weigh on demand. The Fed's decision to leave interest rates unchanged rekindled doubt about the inflation target. ECB President Christine Lagarde signaled no intervention in European selloffs. "I'd call it a pause rather than a turning point," said AJ Bell's Hilary Winn. Next month's US midterms add further caution, though October's yield retreat offers relief to Treasury Secretary Scott Bessent ahead of borrowing plans.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing