Bond Investors Are Bracing for a Bubble and Being Smart About It
- Close longs, shorten duration and use options, managers say
- ‘The risks for bonds are mounting,’ Says Societe Generale
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The fear of a global bond bubble bursting has the market on edge, but it takes a brave investor to bet against a rally that smashed so many records.
Instead, those seeking to guard against a sell-off are favoring less direct ways -- shifting into shorter-dated debt that’s less vulnerable to price swings, buying bearish options and boosting holdings of high-quality credit. Such trades represent a wager that the global economic pessimism, which has been driving the fixed-income surge, is somewhat exaggerated and that inflation still has a chance of picking up.