Fisher Investments is buying long-dated US bonds, a contrarian wager at a moment when 30-year Treasury yields have reached levels not seen since 2007. The firm's move signals a belief that today's higher yields are worth locking in, even as much of the market has shied away from duration.
The yield milestone
The 30-year Treasury yield has climbed to its highest point in more than a decade and a half. That means the cost of borrowing for the US government over three decades has risen sharply, and bond prices have fallen accordingly. For investors who buy now, the yield is the return they'll earn if they hold the bond to maturity.
The last time yields were at these levels was in 2007, a year that many market participants still associate with the onset of the global financial crisis. But the current environment is different, and the firm's decision to step in suggests it sees the higher yields as an opportunity rather than a warning.
A bet against the trend
Long-dated bonds have been out of favor as the Federal Reserve has kept interest rates elevated. Many investors have worried that persistent inflation or heavy government borrowing could push yields even higher, which would further depress bond prices. Fisher Investments is taking the other side.
By buying long-dated bonds, the firm is positioning for a scenario where yields decline in the future, which would push bond prices up. Alternatively, it may simply be content to collect a yield that hasn't been available in years. Either way, the move runs against the grain of a market that has been wary of duration risk.
What the move says
The decision is notable because it comes at a time when the bond market has been volatile. Fisher Investments' contrarian stance suggests it sees more upside than downside in long-dated Treasuries at current levels. The firm has not disclosed the size of the position or the timing of the purchases, but the bet is clear.
Whether that bet pays off will depend on the path of inflation, economic growth, and the Fed's next moves. If the economy slows and the Fed cuts rates, long-dated bonds could rally. If inflation stays sticky, yields could keep climbing, and the firm's position would lose value.
For now, Fisher Investments is willing to stand apart from the crowd. The bond market will provide the verdict.
