Global bond funds bet on economies that tackle inflation first.

Countries that acted quickly to address this year's inflation surge are winning favor with bond investors, while slower-moving economies may pay the price in higher interest rates. Asset managers are buying Australian government bonds, betting that the country's four rate hikes since February mean the tightening cycle is nearing its end; they are also adding to German government bonds, expecting yields to decline. Investors believe that central banks that acted earlier can see the effects of policy sooner and have less room for further rate hikes; the market is betting that different economies will diverge in their paths for tackling inflation.