{"id":73697,"date":"2023-10-17T15:43:38","date_gmt":"2023-10-17T19:43:38","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/long-term-u-s-treasury-yields-may-resume-their-march-higher-despite-recent-bond-market-swings-blackrock-says\/"},"modified":"2023-10-17T15:43:41","modified_gmt":"2023-10-17T19:43:41","slug":"long-term-u-s-treasury-yields-may-resume-their-march-higher-despite-recent-bond-market-swings-blackrock-says","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=73697","title":{"rendered":"Long-term U.S. Treasury yields may resume their march higher despite recent bond-market swings, BlackRock says"},"content":{"rendered":"<div id=\"js-article__body\" itemprop=\"articleBody\" data-sbid=\"WP-MKTW-0002625841\" role=\"document\">\n<p>A recent surge in the U.S. Treasury yields may continue, and the volatility in the world\u2019s biggest bond market is likely to persist as investors demand more compensation for the risk of holding longer-term Treasurys, according to the BlackRock Investment Institute.\u00a0<\/p>\n<p>\u201cWe turn tactically neutral [on] long-term Treasurys as markets price high-for-longer policy rates but [we] stay underweight strategically,\u201d said a group of investment strategists led by Jean Boivin, head of the BlackRock Investment Institute, which is an arm of the world\u2019s largest asset manager BlackRock. \u201cU.S. 10-year yields at 16-year highs show they have adjusted a lot \u2014 but we don\u2019t think the process is over.\u201d\u00a0<\/p>\n<div class=\"paywall\">\n<p><strong>See:<\/strong> Why bond-market investors are not panicking about the worst Treasury bear market in history<\/p>\n<p>The U.S. Treasury market has tanked in a broad selloff since early 2022 when the Federal Reserve started raising interest rates to fight a surge in inflation, leaving the bedrock of the global financial system tumbling into its worst bear market in history. Treasury yields, which move inversely to prices, have risen sharply to levels not seen in 16 years as the central bank\u2019s rate-hiking path remains unclear amid a batch of positive economic data. <\/p>\n<p>Strategists at BlackRock Investment Institute had been underweight longer-term U.S. Treasurys on a six- to 12-month tactical horizon since late 2020 as they saw the economic outlook heralding higher rates. <\/p>\n<p>The next step, however, is not overweight, said Boivin and his team. They expect investors to demand more compensation, or term premium, for the risk of holding long-term bonds, so they remain underweight on \u201ca long-run, strategic horizon,\u201d the strategists wrote in a Monday note.\u00a0<\/p>\n<p>\u201cThe repricing of Federal Reserve policy rates has been a big part of the yield move since the Fed\u2019s first hike in 2022,\u201d Boivin and his team said. \u201cWe see the yield surge driven by expected policy rates nearing a peak. Rising term premium will likely be the next driver of higher yields.\u201d<\/p>\n<p><strong>See: <\/strong>Here\u2019s a chart on one of the biggest factors behind rising yields this week<\/p>\n<p>The term premium of Treasurys, or the compensation that investors require for bearing the risk that interest rates may change over the life of the bond, turned positive for the first time in almost two years in late September. The premium tends to rise when inflation or the Fed\u2019s monetary tightening path becomes tough to predict.<\/p>\n<p>Long-term yields will eventually resume their march higher as the term premium gradually rises to account for greater macroeconomic volatility, persistent inflation, large fiscal deficits and rising government debt issuance, BlackRock strategists said. \u201cWe think 10-year yields could reach 5% or higher on a longer-term horizon,\u201d they added.\u00a0<\/p>\n<p><strong>See:<\/strong> Why Treasurys could give the U.S. stock market a green light for a year-end rally<\/p>\n<p>Treasury yields were back on track to establish fresh 16-year highs on Tuesday, with the yield on the 10-year Treasury note<br \/>\n        BX:TMUBMUSD10Y<br \/>\n       up 13 basis points at 4.850%, while the yield on the 30-year Treasury bond<br \/>\n        BX:TMUBMUSD30Y<br \/>\n       advanced 8 basis points, at 4.949%. Both were on track to log their highest yields since August 2007, according to Dow Jones Market Data.\u00a0<\/p>\n<p>Drivers of further yield jumps and tightening financial conditions are still up for debate, but one thing is for sure, these uncertainties are set to create more volatility in the near term, without yields moving in a clear direction, strategists said.\u00a0<\/p>\n<p><strong>\u201c<\/strong>We now see about equal odds that Treasury yields swing in either direction,\u201d Boivin and his team said. In other words, they see \u201ctwo-way volatility\u201d ahead as policymakers are assessing financial conditions as further damage from rate hikes will likely become clearer over time, the strategists said.<\/p>\n<p>\u201cWe think these conditions bring us closer to when the \u2018politics of inflation,\u2019 or pressure on the Fed to curb inflation, will turn into pressure to stop hurting economic activity with tight monetary policy,\u201d they wrote, but for now the analysts still see the Fed holding policy tight to lean against inflationary pressures.\u00a0<\/p>\n<\/p><\/div>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.marketwatch.com\/story\/long-term-u-s-treasury-yields-may-resume-their-march-higher-despite-recent-bond-market-swings-blackrock-says-e662899d?mod=markets\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A recent surge in the U.S. Treasury yields may continue, and the volatility in the world\u2019s biggest bond market is likely to persist as investors demand more compensation for the risk of holding longer-term Treasurys, according to the BlackRock Investment Institute.\u00a0 \u201cWe turn tactically neutral [on] long-term Treasurys as markets price high-for-longer policy rates but [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":69732,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-73697","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Long-term U.S. Treasury yields may resume their march higher despite recent bond-market swings, BlackRock says | iFintechWorld<\/title>\n<meta name=\"description\" content=\"A 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