Global bond investors shift focus to Australia and Europe as Fed inflation doubts grow

The world’s biggest bond investors are doing something that would have sounded borderline contrarian a year ago: they’re betting against US Treasuries and moving money into Australian and European government debt instead. The reason is straightforward, if uncomfortable for the Fed. Global institutions are losing faith in America’s ability to get inflation under control. Schroders Plc, which manages roughly $1.1 trillion in assets, is leading the charge. The firm has been actively increasing bearish positions on US 5-year and 10-year Treasury notes while reallocating capital toward front-end government bonds in Australia, the UK, and the eurozone. Why the Fed is losing the room The Federal Reserve’s most recent policy meeting didn’t exactly inspire confidence. The central bank held interest rates steady, but the decision wasn’t unanimous. Some officials pushed for further rate hikes, citing persistent inflationary pressures. Meanwhile, central banks in other regions are telling a more decisive story. The Reserve Bank of Australia raised its overnight cash rate by 25 basis points to 4.35%. The European Central Bank has signaled that further monetary tightening is on the table. While ...