Kevin Zhao has seen enough. The head of global sovereign and currency strategies at UBS Asset Management announced plans to short US Treasuries, arguing that a durable American economic expansion is quietly eroding the case for holding government bonds at current yield levels.
The setup: yields, entry points, and a fund that is already outperforming
The 10-year Treasury yield sat at 4.53% as of July 11, 2026. Zhao is not chasing that level. He plans to sell into rallies, specifically targeting a short entry if yields dip below 4.3%, treating any bond price strength as an invitation rather than a warning.
The UBS Global Dynamic USD fund has returned 2.3% year-to-date in 2026, outperforming nearly 90% of its peer group. The retail version of the same fund has posted a 1.5% return over the same stretch.
Zhao’s core argument centers on US economic resilience. He points to the economy’s ability to absorb energy shocks without the kind of growth disruption that has plagued Europe, and he credits AI-driven investment as a structural tailwind compounding American advantages.
Why Europe gets the other side of this trade
Zhao is not simply bearish on bonds across the board. He is making a relative value call, and the other side of it involves German bunds. Europe faces more acute vulnerability to energy volatility, and the continent is likely to extract less economic benefit from the AI investment cycle than the US.
Zhao has set a specific trigger for the bund trade. He intends to buy German bunds if longer-dated yields rise another 10 basis points from 3.12%.
The practical implication is a relative trade: short US duration, long German duration. It is a bet that America’s economic strength continues to diverge from Europe’s more fragile footing, grounded in Zhao’s structural arguments around energy exposure and AI investment diffusion.