Quantitative hedge funds are emerging as major beneficiaries of this year's sharp sell-off in global government bonds, with trend-following strategies profiting from sustained moves in yields amid inflation concerns, higher energy prices and resilient US economic data, according to a report by the Financial Times.

US 10-year Treasury yields have climbed from around 4% at the end of February to above 5.2%, while government debt in France, the UK and Italy has also come under significant pressure. As bond prices fall, yields rise, creating a powerful trend for systematic funds positioned against fixed income.

Connecticut-based Graham Capital is among the managers to have benefited. Its Tactical Trend fund has gained more than 31% so far this year, including a 3.3% increase last month, according to people familiar with the performance.

Winton's Diversified Macro fund, meanwhile, was up 17.5% in the year through the end of last week, while Aspect Capital's flagship strategy has gained about 21% year to date and almost 5% in the latest month, according to investors familiar with the figures.

The performance reflects the environment in which quantitative trend-following strategies tend to thrive: persistent moves across multiple asset classes that allow models to establish and maintain directional positions.

Oil has been a significant contributor to the changing market backdrop, with Brent crude rising roughly 40% since the outbreak of war in Iran in February. Higher energy prices have reinforced concerns about inflation and increased expectations that central banks may need to maintain or raise interest rates.

The environment is reminiscent of 2022, when central banks embarked on aggressive tightening campaigns to combat persistent inflation and trend-following funds generated substantial returns from short positions in government bonds.

The latest bond rout has also produced significant divergences across developed sovereign debt markets. Germany has emerged as a relative haven as investors reassess exposure to higher-debt countries and US Treasuries.

German bonds have benefited from perceptions of stronger fiscal credibility and lower debt levels, while hedge funds have been forced to unwind previously popular positions, including trades betting on Italian government bonds outperforming German debt.

The sharp moves have increased the importance of positioning and leverage across rates markets. As crowded trades are unwound, market volatility can increase rapidly, creating both opportunities and risks for systematic and discretionary hedge funds.