How the world's biggest bond managers are investing in a tumultuous market
TLT•Major bond fund managers are favoring selective, higher-quality investments and avoiding large macro bets as bond markets swing. The Bloomberg Aggregate Index is down 1% this year, while 10-year Treasury yields hover around 5%.
1. Managers favor caution
Eight of the largest U.S. bond fund managers, overseeing nearly $700 billion collectively, described a cautious approach, favoring careful security selection over large macro bets. Most are outperforming the Bloomberg Aggregate Index but remain in the red year to date, while the index is down 1%.
2. Higher yields offer income
Managers said higher starting yields can help offset bond price declines by providing more income. Yields on the benchmark 10-year Treasury are hovering around 5%, which some managers said is creating buying opportunities.
3. Shorter-term, higher-quality focus
Several managers favor shorter-term, higher-quality securities, including investment-grade corporate bonds and mortgage-backed or other securitized assets. Views on AI-related corporate debt varied: some managers are avoiding it or waiting for more attractive yields, while Capital Group's Pramod Atluri said select issues offer what he called “AA risk at BBB prices.”
