Nov. 17 (Bloomberg) — After the legions of market savants missed out on hundreds of billions of dollars in gains this year anticipating a tumble in bonds, you’d think they would have found another target. You’d be wrong.

Given the chance to speculate on declines in only one asset class, 45 percent of investors, traders and analysts in a quarterly Bloomberg Global Poll conducted last week picked debt securities of some type as their top choice, more than three times the percentage who selected gold. Among the options, most chose government debt and junk bonds over assets that also included stocks, commodities, currencies and real estate.

While the resilience of Treasuries to speculative-grade corporate bonds and emerging-market sovereign debt surprised almost everyone this year, bond skeptics are still convinced a strengthening U.S. economy will ultimately lead to higher yields as the Federal Reserve lifts interest rates. The poll respondents were bearish on bonds even as they said a lack of inflation, which has propelled the biggest global bond returns in a decade, was a greater threat to the economy than inflation.

“For rates to go a lot lower in the U.S. from the point they are trading at right now, things would have to go very bad in terms of growth,” Raul Fernandez Diaque, a money manager at Internacional de Capitales SA de CV, a hedge-fund firm that oversees almost $1 billion, said by telephone on Nov. 13 from Lomas, Mexico. The survey participant said putting on a bearish wager on Treasuries “is something on our radar.”

Top Pick

If they could only buy one asset today, 30 percent of Bloomberg poll respondents picked stocks in developed nations. That’s the most among any asset and more than twice the percentage of real estate, the second-most popular long pick.

Wall Street prognosticators were just as bearish on bonds at the start of the year, bolstered by signs U.S. demand would allow the Fed to end its unprecedented stimulus and lead the central bank to raise interest rates from close to zero.

Based on a Bloomberg survey of economists and strategists in January, they foresaw yields on the 10-year Treasury note, the benchmark for trillions of dollars of securities, rising to 3.44 percent by year-end, from 3.03 percent at the end of 2013.

Instead, Treasuries advanced as lackluster wage growth, turmoil from the Middle East to Russia and even the outbreak of Ebola caused investors to pour into the debt.

Bond Gains

That’s caused the forecasters to lower their year-end estimates for 10 straight months as yields on the 10-year note plummeted 0.71 percentage point this year to 2.32 percent last week. The yield was 2.34 percent at 3:25 p.m. in New York.

Gains haven’t been limited to Treasuries. Yields across Europe plunged to records, with the benchmark German bund falling below 1 percent, as the specter of deflation emerged.

At the same time, emerging-market sovereign debt and junk-rated corporate bonds rallied as steps by central banks around the world to suppress borrowing costs and bolster their economies pushed investors into higher-yielding assets.

Bonds worldwide have returned 6.4 percent this year, the most since 2002, according to the $45.7 trillion of debt securities included in the Bank of America Merrill Lynch Global Broad Market Index. That’s equal to about $281 billion in price gains and interest over that span.

With average bond yields globally falling to a record 1.51 percent last month, financial professionals in almost every corner of world are showing renewed confidence that debt securities are finally ripe for a selloff.

Unloved Assets

When asked which asset they would short if they had the opportunity to choose just one, 20 percent of participants in a poll of 510 Bloomberg customers picked government debt, making it the most-popular choice, while 17 percent said junk bonds.

Including those who selected emerging-market debt and investment-grade corporate securities, 45 percent chose to short bonds of one type or another. Gold, which has fallen 14 percent from its high in March, was picked by 12 percent. Five percent answered none of these or not sure.

Short selling is a strategy employed by traders to profit from falling prices. The poll was conducted on Nov. 11 and Nov. 12 by Selzer & Co. a Des Moines, Iowa-based firm, and has a margin of error of plus or minus 4.3 percentage points.

Based on the median estimate of the Fed’s own officials released in September, the central bank’s target overnight rate will reach 1.375 percent by end of 2015. The Fed has held the rate between zero and 0.25 percent since 2008.

Disinflation Risk

Investors are pricing in that the first rate increase will come in 10 months, data compiled by Morgan Stanley show.

The lack of inflation in the U.S. may keep the bear market in bonds that investors foresee from materializing any time soon, said Jeffrey Klingelhofer, a money manager at Thornburg Investment Management Inc. which oversees $89 billion.

The risk that prices will rise more slowly or fall was cited by 47 percent of Bloomberg poll respondents as the greater threat to the U.S. economy, versus 37 percent who said inflation. That’s a reversal from the Bloomberg poll in July, when 55 percent viewed inflation as the more imminent risk.

The Fed’s preferred gauge of inflation has fallen short of its 2 percent target for more than two years, while bond yields imply that consumer prices may only rise an average of 1.56 percent per year over the next five years, from an annual average of 2.1 percent as recently as June.

With monthly wages rising 0.1 percent or less five times this year, U.S. consumers are generating little of the price pressures that would erode the value of fixed-rate payments.

‘Very Unlikely’

That’s helped 30-year Treasuries, the most sensitive to losses when inflation rises, return more than 20 percent.

“The global backdrop makes it very unlikely” for bonds to sell off, Klingelhofer said in a telephone interview from Santa Fe, New Mexico, on Nov. 14. As for the bears, “they’ll be right — one of these days.”

The U.S. economy posted the strongest six months of growth in a decade, recovering from a first-quarter contraction, while employers are adding the most jobs since 1999. The improving labor market and the cheapest gasoline since the end of 2010 have bolstered Americans’ views of the economy to the highest level in almost seven years.

“In many ways, the economic performance this year has been pretty good,” Stephen Stanley, the chief economist at Amherst Pierpont Securities LLC, said by telephone Nov. 14. His 2015 estimate for 10-year yields of 4.25 percent matches the highest of 81 forecasts in a Bloomberg survey. “To me, there is maybe an even better case” for higher yields than a year ago.

Doesn’t Pay

With yields so low, investors are increasingly wary that bonds issued by the neediest companies aren’t compensating them enough for the risk that credit quality will deteriorate even as the economy improves, said David Wyatt, a bond salesman at First Winston Securities in Winston-Salem, North Carolina.

Yields on junk bonds average 6.37 percent globally, below the five-year average of 7.55 percent, index data compiled by Bank of America show. Since 1998, speculative-grade yields have averaged closer to 10 percent.

A majority of bond investors in a Bank of America survey this month said the default rate on junk-rated debt may rise as high as 4 percent in the next year. That’s above the current 1.7 percent rate tracked by Moody’s Investors Service.

“It doesn’t pay you to buy the junk right now because if the music stops, the junk bond is going to get hammered considerably more” than higher-quality debt, Wyatt, who took part in the Bloomberg poll, said by telephone Nov. 13.

More Confident

While financial professionals are bearish on bonds, they see few signs of a slowdown in equities. That’s even after the Standard & Poor’s 500 Index, the benchmark gauge for American common equity, surged to a record last week and extended a bull market that’s tripled the value of U.S. stocks since March 2009.

In Europe and Japan, which have lagged behind the U.S. equities have also rebounded in the past month as their central banks have taken more aggressive steps to boost their economies.

“There’s confidence in the U.S. economy,” Richard Sichel, chief investment officer at Philadelphia Trust Co. which oversees $2 billion, said by telephone on Nov. 14. “The central banks in Europe and Japan are doing a lot and there’s a general feeling that will lessen volatility and enhance prospects to make money going ahead. There’s value in the comfort of developed markets” stocks versus bonds.

To contact the reporters on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net ; Daniel Kruger in New York at dkruger1@bloomberg.net ; Joseph Ciolli in New York at jciolli@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net ; Michael Tsang at mtsang1@bloomberg.net Michael Tsang