Vishal Khanduja turns bullish as Eaton Vance bond fund tops benchmark duration

Vishal Khanduja, co-manager of the $4.1 billion Eaton Vance Total Return Bond Fund, told AdvisorHub he is bullish on US debt for the first time in a decade. He co-manages the fund with Brian Ellis at Morgan Stanley Investment Management. At the end of June the fund held 6.07 years of duration, above the 5.8 years of its Bloomberg US Aggregate Bond Index benchmark, its first duration overweight in more than a decade.

The call lands after a bruising stretch. The 10-year Treasury yield has climbed roughly a percentage point since June to 5.36% on Wednesday, a 24-year high. Elevated energy prices, a resilient economy, heavy government borrowing and a surge in corporate issuance tied to artificial-intelligence investment all pushed in the same direction, according to AdvisorHub’s account.

Khanduja's case rests on income as ballast. At current yields, he argues, investors collect enough to cushion further price declines, even if the selloff still "overshoots" by another 10 to 15 basis points. He calls the Fed a "big bond vigilante." The central bank raised rates last month for the first time in three years and signaled more increases; its inflation fight, he argues, will eventually slow growth and put a ceiling on yields. Tighter financial conditions are already visible, he said, in wider spreads for lower-rated companies and some sovereign borrowers, France among them. "We are pacing ourselves in terms of the magnitude of bets that we are taking," he said, describing a "slowly but steadily" approach to adding yield exposure. "My conviction 12 months out is very, very high."

AdvisorHub reports the fund returned 2.9% a year over the past decade, more than double its benchmark and ahead of 97% of Morningstar peers. This year it has lost about 2.8%, in line with the index and mid-pack among peers, after the Iran war lifted energy prices and revived inflation concerns.

The move is a nudge rather than a swing: the 0.27-year duration gap implies roughly 0.27 percentage points of relative price impact for each one-percentage-point move in yields. The 6.07-year figure is a June snapshot; the interview gives no current number, though Khanduja's description of adding exposure "slowly but steadily" suggests the position has grown since.

Open Arc has trimmed spread exposure and held dry powder, and Amplius has moved toward neutral from an underweight duration stance, as this publication reported this month. That is a shorter posture than the one Khanduja describes. Rieder, in our Sept. 28 coverage, saw opportunity as the 10-year yield topped 5%.