UBS Asset Management’s Kevin Zhao is preparing to short Treasuries, anticipating that strong US economic growth will diminish the appeal of government debt as a safe haven. Zhao, who heads fixed income for Asia Pacific ex-Japan at UBS AM, believes the US economy is outpacing its European counterparts. This divergence in economic performance is expected to put upward pressure on US yields, making current Treasury prices less attractive.

He cites "divergence in growth" as a key factor driving this strategy. The outlook suggests that while other regions may struggle, the US is poised for continued expansion, which typically leads to higher interest rates and lower bond prices. Zhao’s stance reflects a broader sentiment among some investors who are reassessing the traditional role of Treasuries in a portfolio, particularly when economic dynamism is concentrated in specific regions like the United States.

The strategy hinges on the belief that US growth will be more resilient, leading to a scenario where holding Treasuries becomes less advantageous compared to other potential investments. This move by UBS AM signals a notable shift in fixed income strategy, moving away from a long-held safe-haven asset.