(Bloomberg) -- Franklin Templeton deepened its short bond position in the firm’s flagship $33 billion Global Bond Fund last quarter, even as Treasuries rallied and the Federal Reserve signaled an interest-rate cut at the end of this month.

Average duration in the fund, a measure of sensitivity to shifts in rates, dropped to minus 2.82 years as of the end of June, filings published on Tuesday show. The fund, which is managed by Templeton bond chief Michael Hasenstab, has been doubling down on its bond short every quarter for the past two years mainly by buying interest-rate swaps against Treasuries.

The position puts Templeton at odds with most of the market, where easier monetary policy is being priced in as a foregone conclusion. Hasenstab has consistently argued that the economic data point to a steady rise in bond yields, and says it’s only a matter of time before that scenario plays out.

While duration across sovereign debt markets approaches all-time highs, Hasenstab has enlarged his short call from minus 2.21 years at the end of the first quarter and minus 1.14 years 12 months ago.

Read more: Bond Bears Chased Off as Dreams of 4% Treasury Yields Vanish

Templeton’s Global Bond Fund has underperformed more than 80% of peers this year, even though it returned 4.2%, according to Bloomberg data. Total net assets in the fund have dropped by $3.3 billion since June 2018.

In comments made to Bloomberg News in February, Hasenstab forecast that the Fed would keep raising interest rates this year as U.S. labor markets remain “exceptionally strong” while wages and inflationary pressures continue to rise.

In October, Hasenstab said 10-year yields could “easily get above 4%.” On Tuesday they were trading around 2.1%.

To contact the reporter on this story: Natasha Doff in St Petersburg at ndoff@bloomberg.net

To contact the editors responsible for this story: Gregory L. White at gwhite64@bloomberg.net, Cecile Gutscher, Laura Curtis

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