Kevin Zhao, a portfolio manager at UBS Asset Management, is preparing to short US Treasuries. He's waiting for yields to dip below 4.3% before entering the position. The move comes as a strong economy saps the appeal of government bonds.
Why Zhao is betting against Treasuries
Zhao's decision hinges on the US economy's resilience. Robust growth and persistent demand for riskier assets have made Treasuries less attractive. When the economy is humming, investors tend to shun safe havens like government debt. Zhao sees this dynamic continuing, which is why he's positioning for a decline in Treasury prices — meaning higher yields.
His fund has outperformed 90% of its peers so far in 2026. That track record gives him credibility to make a contrarian call. Shorting Treasuries is a bet that yields will rise, and Zhao wants to get in after they've already fallen a bit — below the 4.3% threshold.
The 4.3% entry point
Zhao isn't rushing. He's targeting a yield below 4.3% to initiate the short. That suggests he expects yields to drop further in the near term before reversing course. The current yield on the 10-year Treasury is around 4.4%, so he's waiting for a move of roughly 10 basis points lower. Once that happens, he'll short, betting that yields will climb back up.
It's a tactical play. He's not saying bonds are doomed forever — just that the current economic backdrop doesn't support yields staying low. If the economy stays strong, bond prices should fall.
Fund performance context
Zhao's fund has been a standout. Outperforming 90% of peers in 2026 means he's in the top decile. That kind of performance gives him leeway to make bold moves. But it also raises expectations. A wrong bet on Treasuries could quickly erode that lead.
Still, Zhao is acting on conviction. The strong economy is the key driver. He's not alone in questioning the bond rally — some other managers have also turned cautious on Treasuries. But few have publicly stated a specific entry point like 4.3%.
For now, Zhao waits. The next jobs report or inflation reading could push yields below his target — or keep them above. Either way, he's ready to act when the moment comes.
