Pimco warns US 10-year Treasury yield could hit 6% for first time since 2000
Dan Ivascyn of Pimco told the Financial Times the US 10-year Treasury yield could reach 6 per cent for the first time since 2000, driven by high oil prices, inflation fears and growing public debt. The yield has risen nearly 120 basis points this year and was last above 5.34 per cent.
The benchmark 10-year US Treasury yield could rise to 6 per cent for the first time since 2000 as high oil prices fuel inflation concerns and worries over the country's growing public debt, Dan Ivascyn, Chief Investment Officer at bond fund manager Pimco, told the Financial Times.
US Treasury yields are a yardstick for global borrowing costs and asset prices. The 10-year yield has risen almost 120 basis points this year and is trading slightly below the 5.34 per cent level it hit last week, its highest since 2002.
A sharp rise from the current level of 5.29 per cent was "feasible" in the near term, Ivascyn told the FT on Friday, citing factors such as hedge funds unwinding their losing bond positions. "It is certainly possible, even from a short-term trading perspective, given that some of the activity we've seen in the last couple of weeks is tied to some negative technicals, some stop-out activity from the platform hedge funds and other levered investors. You can certainly get there," he said.
If Treasury yields rose further, it could weigh on riskier assets such as stocks and corporate bonds, he said, adding that a move to 5.5 per cent or higher would likely lead to "some decent weakness in risk markets, both credit and equity".
Global bonds have come under heavy selling pressure this year as soaring energy costs fan inflation and the AI boom lifts economic growth, leaving investors positioning for an era where interest rates stay higher for longer. Bond yields, which rise when prices fall, have consequently soared globally, with the US 10-year Treasury yield posting its biggest quarterly rise this century for the three months ending in September.