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DWS Cuts Treasury Holdings After Bonds Rally Post-U.S. Election

Deutsche Bank AG’s DWS Investments unit, which oversees about $350 billion, cut its holdings of Treasuries to underweight from neutral yesterday, according to Bettina Mueller, a portfolio manager at the firm.

The yield on U.S. 10-year notes has fallen 12 basis points since President Barack Obama won re-election on Nov. 6, dropping to a more than two-month low today. The election results boosted speculation U.S. lawmakers will struggle to avoid the so-called fiscal cliff, the more than $600 billion of tax increases and spending cuts scheduled to take effect automatically next year unless Congress acts.

“The rally in Treasuries has been overdone,” Frankfurt-based Mueller said in a phone interview today. “We thought the market expected Obama to win but just thought it would be a little bit tighter. It’s astonishing that now the market is turning so quickly and we don’t understand that. Our expectation regarding the fiscal cliff is that both sides will come to a compromise.”

The yield on U.S. 10-year notes rose one basis point, or 0.01 percentage point, to 1.63 percent as of 11:21 a.m. New York time, after earlier dropping to 1.578 percent, the lowest since Sept. 5.

Being underweight means owning a smaller percentage of the bonds than is contained in benchmark indexes used to monitor a fund’s performance.

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