Bond Giants Bet $100 Billion on Growth. It Hasn’t Paid Off
- Big money managers expected synchronized growth to drive rates
- Longer-term bonds fail to re-price amid decoupling, trade war
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The luminaries of high finance have staked more than $100 billion in one of the boldest bond bets of the post-crisis era: That a global economy firing on all cylinders would spur government yields in the West and boost emerging-market credits.
The wager comes in the form of bond funds that have a negative average duration, meaning they are heavily positioned for rising interest rates. But the trades are struggling. A perfect storm -- including muted core inflation increases and relentless haven flows -- has kept a lid on longer-dated developed-market yields. Trade tensions and a stronger dollar have killed the emerging-market rally, bucking consensus on Wall Street.