Anshul Sehgal, global co-head of FICC at Goldman Sachs, advises against purchasing 30-year Treasury bonds despite yields exceeding 5%. The yield on the long bond reached a 52-week high of 5.56% on September 29. Sehgal attributes the downward pressure on bond prices to structural factors, including reduced demand from retiring baby boomers and increased long-dated borrowing linked to AI infrastructure.
Sehgal characterizes AI infrastructure, specifically computing power, data centers, and Neocloud providers, as an asymmetric trade with higher potential returns compared to long-term bonds. He acknowledges that these investments involve significant leverage, as higher interest rates have increased the debt burden on companies within the sector. However, he maintains that these assets offer better growth prospects than the broader stock market.
The Federal Reserve raised interest rates on September 16, with 16 of 19 officials anticipating further hikes this year. Sehgal notes that higher rates primarily impact household spending rather than capital investment. While other market participants like BlackRock’s Rick Rieder are shifting toward bonds yielding 7% to 8%, Sehgal identifies the conflict in the Middle East as the primary factor influencing market policy in the near term.
