Not exactly shocking … Lacy Hunt (HIMCO) latest quarterly still a BOND BULLISH read although, I’ve not read it directly. Bloomberg seems to have gotten copy first and I’ll post when avail on Hoisington.com. Bloomberg, though, reporting as follows …
(Bloomberg) -- Hoisington Investment Management Co., famous for its bullish outlook on Treasuries over the past three decades, predicts the securities will benefit as out-sized U.S. inflation sharply subsides and the Federal Reserve’s upcoming balance sheet runoff proves a headwind to economic growth.
The Wasatch-Hoisington U.S. Treasury Fund has lost about 7.8% over the past month as long-term government debt yields rose; last year it lost 4.9% after gaining 20% in 2020
The fund’s effective duration is about 23 years
“With money growth likely to slow even more sharply in response to tapering by the FOMC, the velocity of money in a major downward trend, coupled with increased global over-indebtedness, poor demographics and other headwinds at work, the faster observed inflation of last year should unwind noticeably in 2022,” the firm wrote in its fourth-quarter review note published Wednesday
Poor economic conditions abroad and low yields on overseas government debt means that “foreign investors will continue to be attracted to long-term U.S. Treasury bond yields,” they wrote
The 30-year U.S. Treasury yield hovers at about 2.16%, compared to similar maturity bonds in Germany at about 0.29% and those in the Japan at 0.70%
Domestic demand will also remain robust, “as economic growth disappoints and inflation recedes in 2022,” they said
The firm sees the still deeply negative U.S. real yields -- or Treasury rates adjusted for inflation -- as a red flag for the growth outlook, unlike some past episodes when that lent support to economic activity
“The negative real yields of 2021 add to the already numerous economic headwinds for 2022”
At present “a negative real yield points to the fact that investors or entrepreneurs cannot earn a real return sufficient to cover risks”
Van Hoisington co-manages the fund with David Maxwell Hoisington; Lacy Hunt is the firm’s chief economist
Nothing you prolly couldn’t have guessed he’d say. I’m guessing somewhat more context and as always — and as OTHERS SAY, devils in the details.
Haters gonna hate and I realize he’s had a bad month / year (after a pretty good 2020), he may BE on to something in light of last 20yr auction … ZeroHedge,
… The internals were even more impressive, with Indirects taking down 66.2% which was the second highest in the history of the series, with just July 2020 higher. In other words, foreigners have no concerns about bidding up a storm in the primary market as of right now. And with Directs taking 17.0% (below the recent average of 18.7%), Dealers were left holding 16.8% of the auction, also just below the six-auction average of 18.5%.
Overall, this was a stellar auction, and one which despite a concession did not tail. It's also why after briefly touching 1.90% earlier in the session, the yield on the 10Y TSY has collapsed as low as 1.8253% after the news of the 20Y auction broke.
I’ll post HIMCOs note for all the context and visuals if/when it becomes readily available…
