Three-Decade Treasury Bull Hoisington Turns Bearish
Alina Collins
Hoisington Investment Management — a firm synonymous with bullishness on U.S. Treasuries for over three decades — has officially turned bearish, warning that inflation's equilibrium is shifting to 3.5%–4.5% and that the rate environment ahead will be far less stable than the past thirty years.
Why did a 30-year bull suddenly flip?
Founder Van R. Hoisington and chief economist Lacy Hunt cited a "broader structural backdrop" in their latest quarterly letter: widening fiscal deficits and higher capital demands.
This means → they believe the force pushing rates higher is not cyclical but structural — the government keeps borrowing more, so the cost of borrowing is unlikely to fall back.
Their forecast: inflation's long-run equilibrium is migrating to 3.5%–4.5%, with "significant risk of inflation breaching 5% on a periodic basis."
How much did their positioning change?
The fund's effective duration — a measure of how sensitive a bond portfolio is to rate moves — stood at 20.88 years last September. By March it had dropped to 4.7 years. By June 30 it was under one year.
In plain terms = the longer the duration, the harder you get hit when rates rise. Going from nearly 21 years to under 1 is the difference between a max-conviction bet on falling rates and almost no bet at all.
For context, the Bloomberg U.S. Aggregate Bond Index carries a benchmark duration of roughly six years — Hoisington now sits far below that line.
What triggered the shift?
The turn began in Q1 this year. A reported U.S. military strike on Iran in late February sent oil prices sharply higher, fueling inflation pressure and rate-hike expectations.
Market sentiment reversed: prior expectations of rate cuts gave way to rate-hike pricing.
The U.S. 30-year Treasury yield approached 5.2% in May — its highest since 2007 — and stood at roughly 5.12% as of the report's publication.
What did staying long cost them?
Over the past five years, the fund posted an annualized loss of 8.7%. Assets under management shrank from roughly $5 billion in 2020 to under $2 billion last year.
This reflects how punishing an ultra-long-duration strategy becomes in a sustained rate-rise environment — assets halved as investors walked away.
Even so, the fund's since-inception annualized return still stands at 5.38%, a testament to decades of gains during the long bull run in bonds.
How is the market reading this shift?
DoubleLine Capital CEO Jeffrey Gundlach said on social media that the 30-year yield "keeps meeting resistance above 5%" — and that the resistance "looks unlikely to hold."
He added: "Even Lacy Hunt has turned bearish — credit where it's due."
This means → when the market's most famously steadfast bull capitulates, the signal to other bond investors is hard to miss: the risk of persistently high inflation is being repriced, and elevated rates may no longer be a temporary phenomenon.
Content is for reference only, not financial advice.