The world’s largest bond investors, led by Schroders which manages approximately $1.1 trillion in assets, are now betting against US Treasuries and rotating into Australian and European government debt. The Reserve Bank of Australia raised its overnight cash rate by 25 basis points to 4.35%, while the European Central Bank has signaled further monetary tightening, creating a stark contrast with the Federal Reserve which is holding rates steady without unanimous support. This rotation is being executed through short positions on US 5-year and 10-year Treasury notes and long positions on front-end bonds in Australia, the UK, and the eurozone. Fixed-income managers believe that US debt instruments carry a risk premium that is no longer adequately compensated given America’s inflation uncertainty, which could have ripple effects on risk assets including cryptocurrencies.
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