A Bloomberg Real Yield discussion features Katie Greifeld, Matt DeZach, and Blake Quinn analyzing the recent surge in Treasury yields, driven by a hawkish Federal Reserve. They agree that the market has internalized the Fed's message and now expects higher interest rates for longer. Larry Fink of BlackRock predicts 10-year yields may reach 5% or higher due to embedded inflation.
The guests discuss the impact of supply and demand on the bond market, particularly the lack of buyers and the term premium issue. Matt DeZach believes that real rates are not high enough and that the market is pricing in more risk than necessary. Blake Quinn thinks that the term premium is a significant concern and that yields may move higher due to a lack of buyers.
In the second part of the discussion, Kelly Burden of Barings and Matt Brule of Invesco share their views on the high-yield and investment-grade bond markets. Kelly notes that triple-C bonds have outperformed the rest of the market, but she prefers an up-in-quality trade, focusing on double-B bonds. Matt believes that the soft-landing scenario is still intact and that investment-grade companies will want to pay down debt.
The conversation touches on the current yield and spread environment, with Kelly suggesting that high-yield spreads are relatively rich, while Matt thinks that investment-grade yields are more attractive. They both agree that the yield is the more significant factor in their investment decisions.
The discussion concludes with a preview of the upcoming week's economic releases, including the potential government shutdown, which may impact the jobs report and other data releases.
1. The discussion is about the impact of a hawkish Federal Reserve on Treasury yields, which are currently surging towards cycle highs.
2. The speaker mentions a potential shift in the dynamics of the bond market, with ten-year yields increasing and the bond market testing the Federal Reserve's resolve.
3. The discussion also touches on the possibility of the Federal Reserve losing control of the back end of the yield curve for higher yields, which could lead to concerns about a growth slowdown.
4. The speaker debates whether the recent increase in yields is more about the Federal Reserve or a lack of buyers in the market.
5. The speaker discusses the possibility of structural inflation and how it could impact interest rates.
6. The speaker mentions the potential for multiple inflation spikes and the difficulty of controlling high inflation.
7. The speaker discusses the potential for the market to price in more risk than necessary and the potential for higher nominal yields.
8. The speaker talks about the potential for higher real yields and how it could be attractive in certain situations.
9. The speaker mentions the potential for the Fed to hike rates in November, December, or January.
10. The speaker discusses the potential for the Federal Reserve to keep rates lower for longer due to market expectations.
11. The speaker mentions the potential for higher yields in the future due to the supply of Treasury bonds and the potential for higher inflation.
12. The speaker discusses the potential for the Federal Reserve to hike rates to a 5% level on nominal ten-year Treasury yields.
13. The speaker mentions the potential for higher yields due to concerns about term premium and the potential for the Federal Reserve to hike rates more or hold rates higher for longer.
14. The speaker discusses the potential for global corporations to buy back bonds at the slowest pace since 2009, which could be a sign that they're waiting to refinance.
15. The speaker mentions the potential for leveraged loans to be most exposed to economic headwinds.
16. The speaker discusses the potential for a soft landing in the economy and the benefits of owning bonds in such a scenario.
17. The speaker mentions the potential for the Federal Reserve to hike rates to a 5% level on nominal ten-year Treasury yields.
18. The speaker discusses the potential for higher yields due to concerns about term premium and the potential for the Federal Reserve to hike rates more or hold rates higher for longer.
19. The speaker mentions the potential for a soft landing in the economy and the benefits of owning bonds in such a scenario.
20. The speaker mentions the potential for higher yields due to concerns about term premium and the potential for the Federal Reserve to hike rates more or hold rates higher for longer.
21. The speaker discusses the potential for the Federal Reserve to hike rates to a 5% level on nominal ten-year Treasury yields.
22. The speaker mentions the potential for higher yields due to concerns about term premium and the potential for the Federal Reserve to hike rates more or hold rates higher for longer.