Hoisington Investment Management Co., a bond manager known for its multi-decade bullish stance on US Treasuries, turned bearish on 16 July 2026. The firm’s flagship Wasatch-Hoisington US Treasury Fund has underperformed significantly this year, returning negative 4.2% versus the Bloomberg US Treasury Index’s negative 1.8%. This pivotal shift by a long-term institutional bull marks a stark reversal in sentiment toward government debt.
Context — why this matters now
Hoisington’s bearish turn represents its first negative outlook on US government bonds since the firm’s inception in the late 1980s. The firm built its reputation on a persistent bet that long-term structural disinflation would push Treasury yields lower. Chief Economist Lacy Hunt authored quarterly commentaries that became required reading for bond market participants advocating this view.
The current macroeconomic backdrop features stubbornly persistent inflation and elevated federal deficits. The US Treasury 10-year note yield trades at 4.31%, well above the 2.5% average of the post-2008 period. Core PCE inflation remains at 2.8%, above the Federal Reserve’s 2% target.
The catalyst for Hoisington’s reversal is the recognition that fiscal dominance has overwhelmed monetary policy. Record government debt issuance combined with resilient economic activity has created a sustained supply-demand imbalance in the Treasury market. The firm now believes this structural shift will prevent yields from returning to previous lows.
Data — what the numbers show
Hoisington’s Wasatch-Hoisington US Treasury Fund manages approximately $2.1 billion in assets. The fund has delivered an annualized return of 6.2% over the past thirty years, outperforming many peers during the great bond bull market. Year-to-date through July 15, the fund has declined 4.2%, underperforming its benchmark by 240 basis points.
The firm’s historical performance shows remarkable consistency through various market cycles:
| Period | Fund Return | Benchmark Return |
|---|
| 2020 | +18.3% | +8.0% |
| 2021 | -3.1% | -2.3% |
| 2022 | -32.5% | -12.5% |
| 2023 | +6.8% | +4.1% |
| 2024 YTD | -4.2% | -1.8% |
Current Treasury market conditions show record supply absorption challenges. The US government issued $2.7 trillion in net new debt during the past twelve months. Foreign ownership of US Treasuries has declined to 33% of outstanding debt from 43% a decade ago.
Analysis — what it means for markets / sectors / tickers
The financial sector [XLF] stands to benefit from higher sustained yields, particularly regional banks with large net interest margin exposure. Insurance companies [KIE] may face pressure on their fixed-income portfolios but could eventually benefit from higher reinvestment rates. Mortgage REITs [REM] face continued headwinds as higher yields compress valuations and increase hedging costs.
A counter-argument suggests that any economic slowdown could quickly reverse yield increases, making Hoisington’s bearish call premature. The Treasury market has consistently anticipated economic weakness that failed to materialize, creating pain for bears throughout 2024.
Institutional flow data shows pension funds and foreign central banks reducing Treasury allocations by approximately $180 billion over the past quarter. Hedge funds have increased short positions in Treasury futures to record levels, with net speculative shorts reaching $85 billion across the yield curve.
Outlook — what to watch next
The August 2nd Treasury refunding announcement will provide critical information about future supply levels and maturity distribution. The July 31st FOMC meeting may offer guidance on quantitative tightening taper prospects, which would affect Treasury market technicals.
Technical levels suggest 4.50% represents critical resistance for the 10-year note, with a break above potentially targeting 4.75%. Support resides at the 200-day moving average of 4.15%, which has contained yield declines through most of 2024.
The September 15th CPI report will provide the next major inflation data point following recent elevated readings. Any significant deviation from expectations could alter the trajectory of Treasury yields and Fed policy expectations.
Frequently Asked Questions
What does Hoisington's bearish turn mean for retail bond investors?
Retail investors holding long-duration bond funds [TLT] or target-date retirement funds face continued pressure from rising yields. Bond prices move inversely to yields, particularly for longer maturity instruments. Investors should review duration exposure in their portfolios and consider shorter-duration strategies [SHY] or floating-rate instruments [FLOT] while the bearish trend persists.
How does this compare to previous bond market cycle turning points?
The current environment differs from the 1994 bond massacre or 2013 taper tantrum because of the magnitude of structural deficits. The US budget deficit exceeds 6% of GDP during peacetime economic expansion, unlike previous periods of fiscal responsibility. This creates persistent supply pressure that previous cycles lacked, suggesting yield increases may prove more durable than transient spikes.
What historical precedent exists for such a dramatic manager shift?
Bill Gross's departure from PIMCO in 2014 represented a similarly seismic shift in fixed-income management, though for different reasons. The last comparable fundamental outlook reversal occurred in 1999 when several prominent bond managers turned bullish prematurely before yields continued rising for three more years. Manager conviction shifts often mark inflection points, though timing remains challenging.
Bottom Line
A three-decade Treasury bull has capitulated to the new regime of higher yields.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
