Long-Term U.S. Treasuries are Back on Investors’ Radar
This countercyclical strategy is based on the view that markets may have over-discounted the likelihood of further rate cuts by the Fed.
Quick overview
- Contrarian Wall Street investors are finding buying opportunities in long-term bonds as yields reach nearly 5%.
- This strategy emerges despite expectations that longer-dated bonds would remain under pressure in 2026.
- Investors view the current yield levels as attractive for initiating long positions, particularly in the 30-year Treasury.
- The belief is that markets may have overestimated the likelihood of further rate cuts by the Federal Reserve.
The Wall Street strategy is emerging just as most market participants had expected longer-dated bonds to remain under pressure in 2026.
In the vast U.S. Treasury market—worth more than $30 trillion—a group of contrarian Wall Street investors is spotting a buying opportunity following the recent sell-off that pushed long-term yields to levels not seen in months.
Those yields, which reflect borrowing costs across different maturities, climbed to nearly 5% on 30-year Treasuries, a threshold that some asset managers now view as highly attractive for initiating long positions.
This contrarian approach—positioning against the prevailing market consensus—comes at a time when most investors had expected longer-maturity bonds to remain under pressure in 2026, particularly relative to shorter-dated securities.
Why Wall Street is warming to long-dated bonds
Until recently, the dominant view was that the yield curve would flatten or steepen in a way that favored shorter-duration assets, based on expectations that the Federal Reserve would keep interest rates on hold without additional cuts in the near term.
However, the recent move in yields has created what some investors see as an attractive entry point at the long end of the curve. For many, the 5% yield on the 30-year Treasury has become a clear “line in the sand.” Until that level is reached decisively, some managers prefer to position more heavily in the 10-year segment.
A contrarian bet
This countercyclical strategy is based on the view that markets may have over-discounted the likelihood of further rate cuts by the Fed, especially given that inflation remains relatively elevated.
If the central bank stays firm and refrains from easing policy for several months, longer-term yields could stabilize and eventually decline—generating capital gains for investors who buy at current levels.
In addition, some managers believe there may be an implicit government backstop if long-term yields rise too sharply, reinforcing the idea that current yield levels could represent a compelling entry point for long-duration bonds.
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