The bond bear market, touted by billionaire fund managers Bill Gross and Ray Dalio, is about to run into a multibillion-dollar roadblock.
Strategists across Wall Street, from Credit Suisse Group to J.P. Morgan Chase, predict that the runup in stocks will spur portfolio rebalancing by U.S. pension funds, driving pent-up demand into bonds as managers shift their more than $7 trillion in assets. While the S&P 500 index has returned about 6.2% since the beginning of the year, 10-year Treasury futures have slumped 1.5%, pushing yields to near the highest since 2014. The bond benchmark was little changed in trading Thursday (25.1.18).
With those profits and losses in mind heading into month-end, pension funds will purchase about $24 billion in fixed-income securities, while selling an unusually high $12 billion of U.S. equities, according to a Credit Suisse model. And they don’t have many more chances to make the shift: funds have less than five trading sessions to complete their month-end allocation requirements. On top of that, the Federal Reserve’s policy meeting falls on Jan. 31, which may push some to get their trades done early.