(Bloomberg) -- UBS Asset Management’s Kevin Zhao plans to keep working during the holidays this year, hoping that if US Treasuries selloff amid thin trading volumes he’ll be there to buy.
Zhao, a portfolio manager at the Swiss investment house, is betting that President-elect Donald Trump’s policies will hurt the world’s biggest economy, spurring gains for US bonds next year. It’s a contrarian stance given many investors believe Trump’s plans for tax cuts and global trade tariffs will lift US growth and spur inflation, weighing on the bond market.
“I will be looking to buy between Christmas and New Year, because that’s when markets can be illiquid and jumpy as many people are on holiday,” said Zhao, who leads the Swiss firm’s actively managed sovereign, fixed income and currency funds. “Over the next seven to nine months, Trump policies will actually be negative for growth,” he said in an interview.
Zhao is among a pool of funds eyeing Treasuries because of the risks to the US economy from potential trade restrictions. They’re at odds with the wider market, with investors dumping Treasuries this week to send yields to the highest since May following Federal Reserve caution over rate cuts in 2025.
Zhao expects the 10-year yield to rise to 4.6%, from around 4.54% currently, before the year is out. The London-based portfolio manager said he was willing to work through the year-end holidays for the chance to buy on a tactical basis if it exceeds that level.
The period between Christmas and New Year is generally the quietest time of the year in financial markets, as traders and investors in most Western countries are on holiday, even as markets remain open for much of that period. Last year Zhao went to Barbados, but he’s sticking around this time.
“The market could jump on even minor news,” he said.
He thinks the market is factoring in the benefit of tax cuts too soon, since he sees such policy discussions only starting in the third quarter next year. That means Americans may have to wait until 2026 to see any economic boost, he said.
Zhao has already been warming to Treasuries on a tactical basis, shifting to a neutral stance ahead of US retail sales data earlier this week. Before that, he had been underweight for much of 2024.
“Broadly, we should be neutral with Treasury yields around 4.4% to 4.5%, and look to buy around 4.55% to 4.65%, so we’re very close.”
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