Lacy Hunt bond outlook flips after decades of Treasury bullishness

The Lacy Hunt bond outlook has taken a sharp turn: the longtime long-bond bull and his Hoisington Investment Management partner Van Hoisington now expect higher U.S. inflation and rising long-term Treasury yields, according to MarketWatch columnist Charlie Garcia.

For investors who used long-dated Treasurys as the “safe” side of a portfolio, the move is a loud signal from a famously patient corner of the bond market. Garcia wrote that Hunt had favored 30-year U.S. Treasurys since the early 1980s, when inflation and mortgage rates were far higher than today.

Hoisington Investment Management’s fourth-quarter 2025 shareholder letter said disinflation was expected to continue through 2026 and that lower long-term yields were becoming more likely. Garcia reported that the firm has since shifted its view, expecting equilibrium inflation to move toward 3.5% to 4.5%, with inflation and long-term Treasury yields trending higher.

Why did Lacy Hunt turn bearish on bonds?

Garcia said the change reflects Hoisington’s view that the long period of falling inflation and falling rates has lost key supports, including cheap global goods, steady foreign demand for U.S. debt and the assumption that bonds will reliably cushion stock losses.

The firm’s portfolio actions changed before many investors noticed the explanation. The Wasatch-Hoisington U.S. Treasury Fund’s first-quarter 2026 commentary said its average maturity had been reduced to about 4.5 years, roughly in line with its bond benchmark. Garcia reported that the fund’s effective duration was about 20.9 years last September, 4.7 years by the end of March and under one year by June 30, compared with a benchmark near six years.

Duration measures how sensitive a bond or bond fund is to interest-rate moves. A higher duration means bigger price swings when yields rise or fall, so cutting duration below one year sharply reduces exposure to rising long-term rates.

Jeffrey Gundlach, chief executive of DoubleLine Capital, reacted on X by writing: “Even Lacy Hunt has turned bearish, to his credit.”

Garcia also pointed to pressure from overseas buyers. He wrote that Japan remains the largest foreign holder of U.S. debt, with roughly $1.2 trillion, while Japanese government bond yields have climbed. The 10-year Japanese government bond touched 2.901% on July 9, the highest level since 1996, according to the figures cited by Garcia.

Inflation data give investors a mixed picture. Garcia noted that June CPI was 3.5%, down from 4.2%, and included the first monthly price decline in six years. He also wrote that the Strait of Hormuz closed on July 8 and argued that oil could affect later inflation readings, citing Hunt’s estimate that oil accounts for roughly 12% to 15% of CPI directly and indirectly.

The Strategic Petroleum Reserve stood at 311.4 million barrels in the week ending July 17, the lowest level since April 1983, according to Energy Information Administration data cited by Garcia. Energy Secretary Chris Wright put the cost of refilling it at roughly $20 billion over several years, Garcia wrote.

The next CPI release is scheduled for Aug. 12, according to the Bureau of Labor Statistics calendar cited in the column. Garcia said the 30-year Treasury yield barely moved after the cooler June inflation reading, while the July 9 30-year auction cleared at 5.058%, the highest since 2007.

For ordinary investors, the takeaway is plain: a bond fund packed with long-duration Treasurys is exposed to falling-rate hopes, not just “safety.” Garcia wrote that Hoisington still expects a U.S. recession, but now sees rising long-bond yields alongside it.

This story draws on original reporting from MarketWatch.