Schroder's rare shift: from “years of low allocation” to “slight overbalance” betting on a rebound in long-term US debt

The Zhitong Finance App learned that British asset management giant Schroders Plc (Schroders Plc) recently increased its position on long-term US Treasury bonds and believes that after experiencing this round of sell-off, the yield is close to the phased top. Johanna Kirklund (Johanna Kirklund), Schroder's Global Chief Investment Officer, said when talking about 10-year US bonds: “From a valuation perspective, the current level is more attractive than before. Given the recent rise in yield, we think it would be appropriate to allocate for a certain period of time now.”

By the end of the second quarter, Schroder's assets under management were approximately US$1.15 trillion. Kirkland revealed in an interview on Thursday that the company has begun to increase its long-term exposure this summer, further increased its positions in recent weeks, and adjusted its position on global bonds from “low value” to “slight overallocation” — for most of the previous period, Schroeder had an attitude of low allocation of bonds as a whole. This position continued throughout most of the past few years.

This judgment comes at a time when bond yields in major global markets have soared to multi-year highs. Affected by high crude oil prices and rising concerns about inflation, the market's expectations for the Fed's interest rate hike continue to ferment. The 10-year US Treasury yield rose to about 4.82% on Wednesday, a record high since 2023.

“We judge that the current level is roughly at the top of the current yield fluctuation range,” Kirkland said. “The current range of 4.80% to 5% has buying value for us, and we are expected to see a rebound at a tradable level in the future, and the yield may fall back to around 4.5%.”

Despite this, many fund managers remain cautious about long-term debt. Investors are increasingly concerned about fiscal credibility and policy risks, and are demanding higher term premiums. Currently, the market generally anticipates that the Federal Reserve may raise interest rates again this month.

Kirkland said in this regard: “If the Federal Reserve raises interest rates, this expectation has been fully digested by the market. If inflation data is weak and the Federal Reserve unexpectedly stands still, the bond market is likely to rebound.”