Optimism about economic recovery has triggered a selloff in U.S. Treasurys that is pushing fixed-income investors to run for cover in some unlikely havens.
Fund managers are bulking up on junk bonds, corporate loans, equity-linked bonds and even stocks, analysts and investors said, while selling assets that trade more in line with government debt, including mortgage-backed and investment-grade corporate bonds.
Investors typically view U.S. Treasurys as so safe that many refer to their yield as the risk-free rate, while stocks and below-investment-grade debt are known as risk assets because the companies that issue them can go out of business. The recent selling highlights how sensitive to volatility the market has become with interest rates near zero.
“We’re in this period where fixed-income markets and fixed-income securities are becoming less and less attractive,” said Ed Perks, who runs a $68 billion fund at Franklin Templeton Investments that buys a mix of stocks and bonds.
Mr. Perks cut debt holdings to 30% in January from roughly 50% a year earlier. About two-thirds of that is in junk bonds, which move more with equities than Treasurys. The fund’s top two stockholdings as of Jan. 31 were a 3.2% allocation to JPMorgan Chase & Co. and a 2.2% allocation to Chevron Corp , according to data from Morningstar Inc.
