Bloomberg News

Mizuho’s Takei, Who Foretold U.S. Debt Rally, Sees Further Gain

September 06, 2011

Sept. 6 (Bloomberg) -- Mizuho Asset Management Co.’s Akira Takei, who correctly predicted the rally in Treasuries, said 10- year yields may drop below 1.5 percent within six months.

Takei, general manager of the international fixed-income investment department at Mizuho Asset which manages the equivalent of $43 billion, said in a June interview that 10-year yields would fall to 2.4 percent within a few months and that he favored longer-maturity debt. The rate touched that level on Aug. 4 and dropped to a record 1.9066 percent today.

The Federal Reserve pledged last month that it will keep its benchmark interest rate at a record low at least through mid-2013 to bolster the economy. Two-year yields were at 0.196 percent today, below the upper end of the Fed’s target range for its funds rate of zero to 0.25 percent.

“The Fed’s pledge means yields up to two years can be zero, which will in turn weigh on the yield curve and provide support for longer-maturity debt,” Tokyo-based Takei said by phone today. “The implication of this pledge has yet to be fully digested in the market, but it will eventually sink in.”

U.S. government debt with a maturity of 10 years or longer has handed investors a 21 percent gain this year, set for the biggest annual advance since 2008, according to an index compiled by Bank of America Merrill Lynch. Treasuries with a maturity of one to 10 years have returned 6.1 percent during the period.

Takei said his portfolio is concentrated on debt with a maturity of 10 years and longer and he’s considering selling one- to three-year notes to buy 30-year debt for higher-yields. U.S. bond yields for all maturities are below the inflation rate of 3.6 percent.

Gross Mistake

Pacific Investment Management Co.’s Bill Gross said in a Financial Times interview last month it was a mistake to sell his fund’s holdings of U.S. government debt.

“I get that it was my/our mistake in thinking that the U.S. economy can chug along at 2 percent real growth rates,” Gross said, according to the FT.

Gross, who runs the world’s biggest bond fund at Pimco, wrote in his June report that Treasuries didn’t yield enough to compensate for inflation.

Mizuho’s Takei said he had a two-hour chat with Gross about six years ago at Pimco’s headquarters in Newport Beach, California.

“What I thought after meeting him was that I wanted to be called Asia’s Bill Gross,” Takei said.

--With reporting by Wes Goodman in Singapore. Editors: Jonathan Annells, Benjamin Purvis

To contact the reporter on this story: Masaki Kondo in Singapore at mkondo3@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.


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