The Treasury market has seen significant movements recently, yet Jason Borbora-Sheen at Ninety One is preparing to take a different stance. He believes that long-dated Treasuries are currently undervalued and anticipate a bounce back. His thesis hinges on expectations for inflation to decline, along with a belief that the Federal Reserve Chair Kevin Warsh will have his credibility restored.
#Why Choose Long-Dated Treasuries Over Shorter-Term Notes?
Borbora-Sheen is strategically positioning himself by betting on 30-year Treasuries to outperform 10-year notes. This approach runs counter to the prevailing market sentiment, which has favored a yield-curve steepening strategy for months. Since mid-2026, long-dated bonds have experienced a sharp selloff, creating what Borbora-Sheen identifies as a market mispricing. Here, 30-year bonds can be purchased at rates that exceed compensation for the associated inflation risks.
#Is Warsh's Credibility Key to the Market's Outlook?
The Fed has kept its benchmark rate steady, signaling its belief in having implemented sufficient measures to bring inflation closer to the 2% target. However, despite these rates, progress has been inconsistent, leading to uncertainty among bond traders regarding future rate trajectories.
Warsh’s firm communications in July 2026 caused substantial shifts in long-dated yield rates as investors began reassessing his statements and their probable implications. Should Warsh’s policies succeed in achieving a durable decrease in inflation, the market will likely adjust its expectations, favoring long-dated bonds, which is exactly where Borbora-Sheen is focusing his investments.
#What Should Fixed-Income Investors Watch For?
Ninety One, a South Africa-based asset management firm known for its active fixed-income strategies, highlights the importance of monitoring upcoming inflation data. If the upcoming release of inflation figures shows signs of advancing towards the 2% goal, Borbora-Sheen’s strategy could yield favorable results quickly. Conversely, any return of inflationary pressures would challenge this stance and potentially prolong the long-term bond selloff that began last summer.
If the Fed decides to cut rates in response to improving inflation, it would act as a significant boost for all bond yields, particularly the 30-year bonds, which are positioned to gain the most from decreased rate expectations and lower term premiums.