Bond managers reduce treasury shorts on slower QE exit expectations

Leading strategic bond fund managers have cut their aggressive shorts on US treasuries, on the expectation the Federal Reserve may postpone plans to scale down QE if growth and inflation continue to undershoot.

Over the past two months the US treasury market has endured one of the heaviest sell-offs since the financial crisis. Yields on benchmark 10-year paper have spiked from 1.66% at the start of May to 2.6% last week, after the Fed announced it may begin tapering its monetary stimulus at the end of 2013. Managers running some of the biggest bond funds –  including Artemis’ James Foster, M&G’s Jim Leaviss and Jupiter’s Ariel Bezalel – have profited from the sell-off by running aggressive short treasury positions, in anticipation of an uptick in yields. However, all three managers have now ...