Home BusinessMarket Bond yields could race through 5%, market forecaster Jim Bianco warns

Bond yields could race through 5%, market forecaster Jim Bianco warns

by Clarence Jones

Wall Street forecaster Jim Bianco has issued a warning about Treasury yields, stating that they could climb even higher in the coming weeks. Bianco, the president of Bianco Research, believes that yields could potentially surpass 5% in the near future.

Speaking on CNBC’s “Fast Money,” Bianco stated that he doesn’t believe the bond market’s upward move is coming to an end. He explained that if the Federal Reserve suggests an end to interest rate hikes while investors perceive inflation to be a threat, it will deter them from investing in bonds.

Bianco believes that this scenario has been detrimental to the bond market, with the more the Fed talks about being done with rate hikes, the worse it becomes. As a result, yields on 5-year and 10-year Treasury notes, as well as the 30-year Treasury bond, have already reached their highest levels since 2007. On Tuesday, the 10-year Treasury yield reached 4.8%, a figure that Bianco considers slightly above fair value. He believes that 4.5% is the fair value for yields.

Furthermore, Bianco noted that the high volatility in the bond market has also affected the stock market. The Dow Jones Industrial Average experienced its worst daily performance since March and is now in the negative for the year. The S&P 500 and the Nasdaq Composite both closed the day more than 1% lower.

Bianco suggests that there has been a capitulation in the bond market, as bond investors and managers have been long throughout the year and have been continuously proven wrong. They have been expecting a rally and a recession, but have faced significant losses. The current situation has resulted in them being unable to bear the losses any longer.

This warning from Bianco comes in line with CNBC on-air editor Rick Santelli’s cautionary words to investors on “Fast Money.” Santelli believes that Treasury rates have a lot of potential upside and, in a worst-case scenario, the 10-year Treasury rates could climb to 13.5% or even 14% within the next seven years.

However, Bianco believes that such high rates would require an extreme situation. He believes that for rates to reach 13%, something much worse than anticipated would have to occur.

Overall, the warning from Jim Bianco about rising Treasury yields should be heeded by investors as it could have significant implications for both the bond and stock markets. As the market continues to fluctuate, it is important for investors to stay informed and adapt their strategies accordingly.

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