- Strategy is buying Treasury bills to take advantage of yields
- US government borrowing also likely to pressure bonds: Miller
A top-performing quant fund is shorting five- to 10-year US Treasuries on expectations that interest rates will stay on hold this year as prices remain elevated.
The Catalyst/Millburn Hedge Strategy Fund is selling Treasury futures while buying short-dated bills. The positions reflect a view that markets may be overestimating the chances of a rate cut by the Federal Reserve, while potentially overlooking the pressure on longer-dated yields from a ballooning US deficit.
“It’s more likely than not that the Fed won’t be able to go ahead with these rate cuts that they talked about,” said David Miller, New York-based chief investment officer at Catalyst Funds. “It’s not clear how you can get rates down without getting inflation back up.”
The fund with more than $7 billion in assets has retur