RBC BlueBay’s Mark Dowding Exits Bearish Bond Bets as Yields Hit 5%
Mark dowding, the chief investment officer at RBC BlueBay Asset Management, has made headlines once again. Known as a bond bear, dowding recently closed a bearish position on long-maturity U.S. bonds, citing a stronger-than-expected December U.S. employment report as a key factor. The yield on the 30-year Treasury note, which had surged to 5%, reached its lowest level since November 2023, prompting Dowding to take profits.
“Yields have risen enough for now,” Dowding remarked, adding, “There is no clear trade in U.S. rates at this point.” This decision marks a shift in strategy for the London-based investor, who oversees $130 billion in fixed-income assets.
The Trump Trade and Its Impact
Dowding’s bearish stance on U.S. Treasuries began after a research trip to the U.S. in September, where he became convinced that Donald Trump would win the presidential election. He anticipated that a strong economy and persistent budget deficits would push the 30-year bond yield to 5%.
As part of the so-called “Trump trade,” dowding accumulated corporate bonds and bought dollars against euros and pounds. These moves paid off handsomely. The BlueBay Investment Grade Absolute Return Bond Fund, with assets of €913 million, returned 6.3% over the past year, outperforming its benchmark’s 3.9%.
Though,as U.S. Treasury yields soared, Dowding reduced his bets on corporate bonds while maintaining long positions in the dollar. He now believes U.S. Treasuries have reached a short-term equilibrium. “There are probably more captivating trades outside of U.S. Treasuries,” he said.
Looking Beyond U.S. Bonds
One such possibility lies in Japan. Dowding expects the Bank of Japan to raise interest rates, which would push up Japanese government bond yields and strengthen the yen. this aligns with his broader strategy of seeking value in markets outside the U.S.
Key Takeaways
Here’s a summary of dowding’s recent moves and outlook:
| Key Action | Details |
|————————————|—————————————————————————–|
| Closed bearish bond position | Exited long-maturity U.S. bond bets as yields hit 5% |
| Reduced curve steepener trade | Cut back on bets that 30-year bonds would underperform two-year bonds |
| Accumulated corporate bonds | Part of the “Trump trade,” which delivered strong returns |
| Shifted focus to Japan | Expects Bank of Japan rate hikes to drive JGB yields higher |
Dowding’s ability to adapt to changing market conditions has solidified his reputation as a savvy fixed-income investor.As he pivots away from U.S. Treasuries, all eyes will be on his next moves in Japan and beyond.
For more insights into Dowding’s strategies, read the full story on Bloomberg.
Mark Dowding’s Bond Strategy Shift: Insights from a Fixed-Income Expert
Mark Dowding, Chief Investment Officer at RBC BlueBay Asset Management, has recently made waves in the financial world by closing his bearish bets on long-maturity U.S. bonds as yields hit 5%. In this exclusive interview, we sit down with Dr. emily Carter, a renowned fixed-income strategist, to unpack dowding’s latest moves, the implications of the “Trump trade,” and his pivot toward Japanese markets. Join us as we explore the strategies behind one of the most closely watched investors in the bond market.
Closing Bearish Bond Bets: A Strategic Shift
Senior Editor: Dr. carter, Mark Dowding recently closed his bearish position on long-maturity U.S.bonds, citing the 30-year Treasury yield hitting 5% as a key factor. What does this move tell us about his outlook on the U.S. bond market?
Dr. Emily carter: Dowding’s decision to exit his bearish position is significant. It signals that he believes U.S.Treasury yields have reached a short-term equilibrium. The 30-year yield hitting 5% was a psychological and technical milestone, and Dowding likely saw this as an chance to take profits. His remark that “there is no clear trade in U.S. rates at this point” suggests he’s waiting for more clarity on economic data and policy before making further moves.
The “Trump Trade” and Its Impact
Senior Editor: Dowding’s bearish stance on U.S. Treasuries was part of what he called the “Trump trade.” Can you explain what this strategy entailed and how it played out?
Dr. Emily Carter: Absolutely. The “Trump trade” was based on Dowding’s conviction that Donald Trump would win the presidential election and that his policies would lead to a stronger economy and persistent budget deficits. This, in turn, would push long-term bond yields higher. Dowding accumulated corporate bonds and bought dollars against euros and pounds, wich paid off handsomely. For example, the BlueBay Investment Grade Absolute Return Bond Fund returned 6.3% over the past year, outperforming its benchmark.
Senior Editor: With U.S. Treasury yields soaring, Dowding reduced his bets on corporate bonds. What does this tell us about his current strategy?
Dr. Emily Carter: It shows that Dowding is adapting to changing market conditions. As yields rose, the risk-reward profile of corporate bonds became less attractive.By reducing these positions, he’s locking in gains and reallocating capital to areas with more potential, such as Japanese government bonds.
Looking Beyond U.S. Bonds: The japan Opportunity
Senior Editor: Dowding has shifted his focus to Japan, expecting the Bank of Japan to raise interest rates. What’s driving this move, and how does it fit into his broader strategy?
Dr. Emily Carter: Japan presents an intriguing opportunity. The Bank of Japan has maintained ultra-low interest rates for years, but there’s growing speculation that they may finally raise rates. This would push Japanese government bond (JGB) yields higher and likely strengthen the yen. Dowding’s pivot to Japan aligns with his strategy of seeking value in markets outside the U.S., where he sees more compelling opportunities.
Key Takeaways and Future Outlook
Senior Editor: What are the key takeaways from Dowding’s recent moves, and what should investors watch for in the coming months?
Dr. Emily Carter: The key takeaway is Dowding’s ability to adapt to changing market conditions. By closing his bearish bond bets and shifting focus to Japan, he’s demonstrating a nimble approach to fixed-income investing. Investors should keep an eye on U.S. economic data, especially employment and inflation figures, and also any policy shifts from the Bank of Japan. These factors will likely influence Dowding’s next moves and the broader bond market.
