Treasuries Bulls in Japan Signal Rally

Despite predictions early this year of a selloff in U.S. Treasuries, investors have been snapping up 10-year and longer government bonds.

The most aggressive foreign buyers of U.S. government debt see little reason to turn bearish after the biggest gains in longer-term Treasuries for two decades.

Japanese investors from Sumitomo Mitsui Trust Asset Management Co. to Mitsubishi UFJ Asset Management Co. say the lack of wage growth to spur U.S. inflation means owning the bonds still makes sense. Japan plowed $86 billion into Treasuries in the past 12 months, the most among the world’s 10 biggest economies, data compiled by Bloomberg show.

Michael Novogratz, principal at Fortress Investment Group LLC, the New York-based hedge fund manager which oversees $62.5 billion, said 30-year bond yields are so low it doesn’t make sense to be bullish and there’s a chance to bet against them.

“Having a sizable short makes sense,” Novogratz said at the SkyBridge Alternatives Conference in Las Vegas on May 15.

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