Wall Street heavyweights Bill Ackman and Larry Fink see inflation remaining higher and expect US Treasury yields to soon hit 5%.
Ackman, who is the CEO of Pershing Square Capital, said at CNBC’s Delivering Alpha 2023 conference on Thursday said inflation will be persistently higher, while noting that US yields in the 4% range are still low on a historical basis.
“I would not be shocked to see 30-year rates well through the 5[%] barrier, and you could see the 10-year approach 5,” he said. “And that could happen in the very short-term. Like literally weeks.”
On Friday, the 10-year yield pulled back to 4.565% after surging to its highest level since 2007 earlier in the week. Meanwhile, the 30-year yield eased to 4.697%.
Fink, who is the CEO of BlackRock, also pointed out that structural inflation will continue to be a future impediment, resulting from a tense geopolitical landscape and the fragmentation of trade norms.
“We’re gonna have 10-year rates at least at 5% or higher, because of this embedded inflation,” he said at the Berlin Global Dialogue Forum on Friday. “This structural inflation is unlike anything, and I think business leaders and politicians are not providing the foundation to help explain this. We have not seen inflation like this in over 30 years.”
Their warnings come after JPMorgan CEO Jamie Dimon also sounded the alarm on sticky inflation pressures this week, citing high federal spending and the growing energy transition.
To combat this, the Federal Reserve would be forced to keep tightening its monetary policy, with a fed funds rate of 7% a real possibility, he added.
And that could keep US Treasury yields higher as they move on expectations of Fed rate policy.
Other commentators have also suggested higher yields, especially as a supply and demand imbalance exists in the Treasury market.
And in a note last week, “bond king” Bill Gross outlined that the 10-year Treasury is priced for a 2% inflationary world, meaning that even if the Fed brings inflation back to pre-pandemic lows, the yield is likely to remain above 4%.
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