As the Federal Reserve’s pledge to keep rates lower for longer diminishes returns on U.S. Treasuries, a Japanese bond fund sees the November presidential election as another reason to avoid them.
"Markets can become unstable as political noises get louder with the presidential election approaching,” Tatsuya Higuchi, executive chief fund manager at Mitsubishi UFJ Kokusai Asset Management Co. said. The firm’s ¥388.6 billion ($3.7 billion) flagship bond fund has reduced its Treasury holdings while adding Spanish and Australian sovereign debt.
The fund’s change in strategy comes amid signs of heavy supply weighing on demand for U.S. government debt, with estimates of more than $1 trillion in net bond sales through December. A three year bond auction last week saw muted demand.