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Analysis: U.S. bond managers say market has overshot, yields too low

Investors at some of the largest U.S. asset managers are holding fast to the view that bond yields will move higher in the second half of this year, despite the recent slide in Treasury yields, which they see as a temporary move.

An unwind of short bets against Treasury debt as well as growing concerns about the recovery of the U.S labor market and the spread of the Delta variant of the coronavirus has pushed down longer-dated U.S. government bond yields. The benchmark 10-year yield hit 1.296% on Wednesday and the 30-year yield fell to 1.918%, the lowest since February for both.

But big U.S. bond managers including BlackRock, PIMCO, DoubleLine and TCW still expect the reopening economy to drive growth and inflation, even if at a slower pace in the second half of this year, and send yields higher again. They see the broader move lower in yields since mid-May, and the accelerated move on Tuesday and Wednesday, as largely the result of investors' unwinding an overblown bet earlier in the year on higher rates.

Reference: Reuters