BlackRock’s Rick Rieder prognosticated interest rates are running up faster than he expected, but ultimately the restoring of more normal volatility is healthier for markets.
Rieder said his see on where the 10-year yield is going has not changed, even with the excitable move higher. “I think we’re going to 3 percent, low 3s. … I’m surprised hither how fast we’re getting there,” he said.
The 10-year yield was as high as 2.88 percent Thursday but fell to 2.81 percent when stocks sold off sharply in reaction. The 10-year was promote up to 2.85 percent in afternoon trading.
“We’ve been in this period of a bit of a la-la berth of extraordinary monetary stimulus, no volatility, creating distortions,” said Rieder, who is BlackRock’s broad chief investment officer of fixed income.
“We live in a world where … chance assets like equities can do well while Treasurys do well, but when you go the other way, you be enduring this dynamic. Treasurys can move higher in yield at the same in the nick of time b soon the market goes down,” said Rieder.
Global central banks are heart-rending to reverse some of that easing. The European Central Bank has cut its quantitative easing in half, and the Bank of England only on Thursday signaled it could raise interest rates sooner and faster than hope for.
Treasury yields moved higher Thursday on the Bank of England newscast, but also on a bipartisan spending bill that widens the U.S. deficit at a dilly-dally when the Treasury is increasing its issuance.
“I do think it argues real berates are too low for a long time, and you should get to the low 3s. … I look at free cash emanate and as the cost of financing goes higher, equity valuations go lower,” he utter. “There’s a tremendous demand argument when you get to the low 3s and maybe you get to 3.50. I don’t meditate on you’re going to go much higher than that. There’s this tremendous market demand from insurance companies, pensions that need yield.”