U.S. Bond Returns Approaching 10% Too Good for Mirae to Pass Up

  • Mirae's Tseng says safety assets still necessary in portfolio
  • Treasury to sell 5-year notes Wednesday, 7-year debt Thursday

Will Tseng was all set to sell his Treasuries earlier this year before a flight to quality ignited the market. He’s still waiting.

“The market is still in chaos,” said Tseng, a bond manager in Taipei for Mirae Asset Global Investments Co., which oversees $73 billion. “Safety assets are still necessary for my portfolio. If I go to high-yield or emerging-market products, I might suffer.”

Thirty-year bonds have returned 9.3 percent in 2016, based on Bank of America Merrill Lynch indexes. They are headed for the biggest two-month gain since December 2014-January 2015. The broader U.S. government debt market has returned 3.3 percent this year, the figures show.

Tseng and other investors piled into Treasuries as tumbling stocks and oil prices drove investors to the relative safety of government debt. The U.S. is scheduled to sell five-year notes Wednesday after demand increased at a two-year sale Tuesday.

U.S. 10-year note yields were little changed at 1.72 percent as of 6:02 a.m. in London, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in February 2026 was 99 1/8.

Fed Vice Chairman Stanley Fischer said he’s uncertain over whether this year’s financial market turmoil signaled global economic woes that may slow the U.S. economy. “It is still early to judge the ramifications of the increased market volatility of the first seven weeks of 2016,” Fischer said in the text of a speech he gave Tuesday.

The Treasury is scheduled to sell $34 billion of five-year notes Wednesday and $28 billion of seven-year debt Thursday. It also plans to auction $13 billion of two-year floating-rate securities Wednesday.

Investors bid for 2.91 times the amount of debt available at Tuesday’s two-year auction, up from 2.9 times at the previous sale in January.

Mirae’s Tseng said he bought Treasuries in December when the 10-year yield was about 2.30 percent. In January, he set a plan to sell at 1.90 percent. The yield tumbled through that level and bottomed at 1.53 percent on Feb. 11. The bulk of his position is in 10-year notes along with some 30-year bonds, he said.

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