British asset manager Schroders has increased its holdings of long-dated U.S. Treasuries, signaling that yields are nearing their peak following a recent market selloff. Johanna Kyrklund, global chief investment officer, noted on the 10-year note that valuations have become more compelling relative to the past, and the current pullback presents an opportunity to modestly extend duration.

Managing $1.15 trillion in assets, Schroders had already added duration during the summer and has further expanded that exposure in recent weeks. In a Thursday interview, Kyrklund stated the firm has shifted its stance on global bond holdings from a duration underweight, maintained for most of this year and the past several years, to a slight overweight.

This positioning stands out as major bond yields worldwide have climbed to multi-year highs, fueled by elevated oil prices, inflation concerns, and persistent bets on Federal Reserve rate hikes. On Wednesday, the 10-year U.S. Treasury yield rose to nearly 4.82%, the highest level since 2023.

"At these levels, we believe we are near the upper end of the yield range," Kyrklund said. "The 4.80% to 5% zone, for us, broadly represents a buying opportunity, and we expect a tradable rebound in bonds, with yields easing back to around 4.5%."

Still, many fund managers remain cautious on long-term debt as investors demand higher yield compensation amid worries over U.S. fiscal credibility and policy risks. Markets are pricing in the possibility of a Fed rate hike this month. Kyrklund added, "The market has already priced in a hike. If inflation data comes in weak and the Fed surprisingly holds steady, bonds are likely to rally."