Fidelity Manager Dumps Nearly All Treasuries on Growth Optimism

(Bloomberg) — A Fidelity International money manager has sold the vast majority of US Treasuries from funds he oversees on expectations the world’s biggest economy still has room to expand.

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Singapore-based George Efstathopoulos, who helps manage about $3 billion of income and growth strategies at Fidelity, sold the bulk of his 10-year and 30-year Treasuries holdings in December. He is now turning to assets that typically do well in times of good economic growth to boost returns.

“We don’t expect sort of a recession anymore,” said Efstathopoulos. “The probability of no landing is still small, but it’s been increasing. If that increases much more, potentially we will not be talking about Fed cuts anymore” in 2024.

Efstathopoulos is among those cooling on Treasuries as the US economy’s resilience forces investors to rethink bets on interest-rate cuts. Some are going a step further, speculating the Federal Reserve’s next move may even be a hike, after the recent strong inflation and jobs reports.

Traders are now pricing under four quarter-point interest-rate cuts in 2024, down from wagers for 150 basis points of cuts this year starting March. Bonds are reflecting the swing in sentiment, with 10-year US yields advancing more than 40 basis points since the start of the year to 4.3%, as comments from Fed officials also reinforce expectations of higher-for-longer rates.

Fed Vice Chair Philip Jefferson warned on Thursday about the dangers of easing too much in response to easing price pressures, while Fed Minneapolis President Neel Kashkari said “we still have some work to do” on inflation.

Efstathopoulos sold Treasuries as concern over US growth faded. The asset is typically less attractive amid elevated borrowing costs, and when prices reflect the Fed’s median forecast of three quarter point interest-rate cuts this year.

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He also sold bonds from other developed markets, including gilts and bunds, while leaving…