A go-to wager in the Treasury market is seeing one of its best runs ever as investors flee long-term US bonds amid President Donald Trump’s escalating trade war.
In a sign of how Treasuries’ status as a global haven during times of turmoil may be fading, rates on longer-term debt soared last week as equities convulsed, turbocharging bets on a steeper yield curve.
The extra yield that investors demand to own 30-year Treasuries over two-year maturities has increased for nine straight weeks, a streak seen only one other time since Bloomberg began collating the data in 1992. Last week, that gap reached levels last seen in 2022, giving a boost to money managers such as DoubleLine that are positioned for such a move.
The appeal of long bonds dimmed last week in part on speculation that Trump’s tariffs will sap international demand for Treasuries at a time when already-bloated US deficits could swell further with Congress debating tax cuts. Meanwhile, with worries around the economy growing, shorter maturities fared better versus longer-dated debt because of expectations the Federal Reserve will soon lower interest rates.
For DoubleLine, anticipating an even steeper curve from two to 30 years is the way to play this dynamic.
“That’s the cleaner expression for us,” said Bill Campbell, a portfolio manager at the firm. “And it’s a curve positioning that continues to remain prudent at this time, given those longer-term factors.”
