Hoisington Investment Management Co, which has been bullish on US Treasuries for the past three decades, expressed a rare caution in its latest quarterly review.

While the prospect of an economic downturn is a "favourable environment for long-term bond investors", the $4 billion asset manager said "investors should be vigilant" if the Fed fails to contain inflation, which is at its highest level in decades.

"at current levels, given the coming recession, the long-term Treasury market is valuable, which tends to lower inflation and interest rates," the company said in its first-quarter assessment released on Thursday. "but if the Fed stops its efforts to control inflation before it is completely under control, then bond investors should be vigilant."

Van Hoisington and David Hoisington co-manage the Treasury fund, and Lacy Hunt has long been the company's chief economist. They are known on Wall Street for betting on the historic bull market in government bonds.

However, the Wasatch-Hoisington US Treasury fund has fallen about 20 per cent so far this year because of higher long-term Treasury yields. Consumer price pressures remain high and traders are betting that the Fed will raise interest rates sharply, triggering a sell-off big enough to go down in history.

The fund fell 6.2 per cent last year and rose 11 per cent in 2020. Its heavy positions are bonds maturing in or after 2045.

Still, the Austin, Texas-based asset manager takes a constructive view of the asset class as a whole.