Wells Fargo Says Big Rush to Bonds Has ‘Gotten Ahead of Itself’

(Bloomberg) -- Bond markets are at risk of becoming overheated as investors rush to anticipate a new cycle of global central bank policy easing, according to Wells Fargo & Co.

The big bond-buying trade has “gotten ahead of itself,” particularly in the U.S., George Rusnak, the Wells Fargo Investment Institute co-head of global fixed-income strategy, said in a Bloomberg TV interview. He described pricing for three Federal Reserve interest-rate cuts as too aggressive.

“We’re a little bit more concerned that there’s this grab for yield without weighing the risks associated with that,” Rusnak said.

The rally in Treasuries has taken 10-year U.S. yields down by more than a percentage point in the past nine months. The market value of negative-yielding debt crossed $13 trillion earlier this month, with even some securities from emerging-market issuers priced at sub-zero rates.

While China might offer some opportunities for yield, Rusnak said caution may be warranted there as well, given the rise in corporate defaults and uncertainty about whether the People’s Bank of China will step up stimulus in the remainder of the year.

--With assistance from Selina Wang, David Ingles and Yvonne Man.

To contact the reporter on this story: Gregor Stuart Hunter in Hong Kong at ghunter21@bloomberg.net

To contact the editor responsible for this story: Christopher Anstey at canstey@bloomberg.net

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