U.S. Long-Bond Yield Above 3% Shouts `Buy' to $2.9 Billion Fund

  • Yields dropped below that level last week amid China turmoil
  • Investors weigh Fed rate move versus demand for bonds as haven

Three percent is the magic number for one investor who likes 30-year Treasuries.

That’s the yield level at which Eric Vanraes says he’s buying the bonds at EI Sturdza Investment Funds, which has $2.9 billion under management. The yield has fluctuated around that level over the past month, slipping below as concern about an economic slowdown in China rocked financial markets around the world last week.

“At the beginning of this year we are sure about only one thing -- it will be volatile,” said Geneva-based Vanraes. “Every move of the 30-year Treasury yield above 3 percent is a buying opportunity.”

Vanraes manages the EI Sturdza Strategic Global Bond Fund, which is beating 82 percent of peers so far this year, according to data compiled by Bloomberg. The fund lost 1.7 percent in the past year, outperforming 34 percent of peers.

Treasuries are facing conflicting pressures as they enter 2016. Federal Reserve policy makers have predicted four interest-rate increases this year. While that should depress demand as it drives yields higher, the turmoil in China is instead boosting their appeal as a haven.

At the same time as he buys 30-year Treasuries, Vanraes has a short position on U.S. two- and five-year notes, meaning he expects the price of those securities to fall.

His outlook bucks the consensus view. The median estimate of analysts surveyed by Bloomberg is for the 30-year yield to climb to 3.38 percent by year-end. The yield was at 2.90 percent Wednesday as of 8:01 a.m. in New York, having held below 3 percent since Jan. 6.

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