Jim Bianco, president of Bianco Research, has shifted his stance on bonds after six years of being a bear. He is now increasing his exposure, citing that yields for maturities ranging from five to 30 years have reached 5% or higher for the first time in two decades. Bianco argues that these yields represent fair value rather than a market malfunction.
The analyst attributes the current 5% nominal economy to a combination of 3% inflation and 2% real growth. He notes that investors are still influenced by the previous decade of negative rates and monetary expansion. While he expects the ongoing bond selloff to potentially continue, he is building his position gradually.
Regarding corporate debt, Bianco views borrowing by major AI and cloud companies as manageable, noting that corporate debt has decreased relative to GDP over the last 15 years. He is currently monitoring risks in triple-C rated credits, specifically within the gaming, cable, and lottery sectors, as these companies may face higher refinancing costs.
Analyst Benjamin Cowen anticipates that the 10-year Treasury yield will peak before mid-November, following a high of 5.342% recorded on October 1. Cowen maintains a long-term outlook that interest rates could continue to rise over the next 10 to 20 years. A sustained 5% baseline for yields could create a higher hurdle for Bitcoin and other risk assets.
