Investing.com -- Computer-driven hedge funds posted strong gains as government bond prices fell sharply, pushing borrowing costs in the US and Europe to multi-decade highs.

Funds using computer models to identify market trends built large positions betting against fixed income securities this year. The Iran war and strong US economic data fueled inflation concerns among investors.

Yields on 10-year US Treasuries climbed from around 4% at the end of February to more than 5.2%. French, UK and Italian bonds also declined. Bond yields move inversely to prices.

Graham Capital's Tactical Trend fund gained more than 31% this year through last month, including a 3.3% increase in September, according to two people familiar with the matter.

Winton's Diversified Macro fund rose 17.5% through Friday of last week. Aspect Capital's flagship fund increased 21% this year and gained almost 5% last month, according to people who saw the figures.

"The embers of inflation are still glowing red," said a director at one quant fund. "From about July onwards our risk has been pointed towards bonds, energy and currencies."

The three funds made gains across multiple asset classes. Winton and Aspect profited from bets on energy markets as the Iran war kept oil prices elevated.

Brent crude rose around 40% since the war began in February. The benchmark settled at $102.31 on Thursday. Fading hopes for a negotiated end to the conflict pushed crude prices higher in recent weeks.

The Federal Reserve raised its policy rate last month for the first time since 2023 in response to higher inflation. The European Central Bank increased rates twice. Traders expect the Bank of England to raise rates in the coming months.

Resilient US economic data strengthened expectations for higher US rates. Record government and corporate debt sales led investors to demand higher yields for long-term lending.

Some investors unwound losing positions as yields rose, which intensified the market moves, according to market participants.