Hoisington's Historic Bear Pivot: 30-Year Bond Bull Is Over

The shift shows up clearly in the fund's regulatory filings. Effective duration, a measure of how sensitive a portfolio is to yield changes, stood at nearly 21 years at the end of September. That fell to under five years by the end of March and to under one year by the end of June, compared with roughly six years for the fund's benchmark, the Bloomberg US Aggregate Bond Index.

The pivot began in the first quarter, when a US attack on Iran in late February triggered a surge in oil prices that stoked inflationary pressures and expectations. Treasury yields climbed as markets shifted from pricing rate cuts to anticipating hikes, with the 30-year yield approaching 5.2% in May, its highest level since 2007, and trading around 5.12% on Thursday. Some observers see the reversal as coming late, given 30-year yields have drifted broadly higher since touching record lows below 2% during the pandemic in 2020, with only occasional rallies interrupting the climb.

The strategy of concentrating client assets in long-maturity and zero-coupon bonds made Hoisington a standout performer during rallies but a heavy laggard during selloffs. The fund's average annual return since inception stands at 5.38% as of June 30, though the past five years have produced annualized losses of 8.7%, and assets under management have shrunk to under $2 billion from about $5 billion in 2020.

Yields continue to face upward pressure from a broader capital spending boom, with companies borrowing heavily to fund artificial intelligence investment, adding further supply to bond markets already swelling from government deficit financing. DoubleLine chief executive Jeffrey Gundlach said this week that the 30-year yield keeps testing resistance just above 5% that seems unlikely to hold, adding that even Hunt turning bearish deserves credit as a signal of where the market is heading.