Bond yields surging to highest level in decades: Jim Bianco

It’s a level not seen since George W. Bush was president.

Wall Street forecaster Jim Bianco is predicting the benchmark 10-year Treasury note yield will hit 5.5% this year — its highest level since May 2001.

A major part of his thesis is built on the economy’s strength and resiliency.

“I don’t think the economy is hurt by 5% interest rates. I don’t think the economy is really hurt by 7%, maybe high 7%, mortgages,” the Bianco Research president said on CNBC’s “Fast Money” on Wednesday. “I don’t think something is broken because of these rates.”

Bianco sees inflation bottoming around 3% and demand holding stable as catalysts for rebounding yields.

“You add the two together, you get 5.5%,” he said. “That’s where I come up with 5.5% for the yield. That’s nominal GDP. The 10-year yield should approximate where nominal GDP is.”

Bianco thinks the rate on the 10-year Treasury will reach 5.5% as early as summer. He correctly predicted last fall’s yield spike above 5%.

His latest forecast includes the impact of the Federal Reserve potentially cutting interest rates three times this year.

“The Fed may be a little stickier in cutting rates. It doesn’t mean they won’t cut rates. It just might not be as aggressive as everybody says,” said Bianco, who warned in late 2020 on CNBC that there would be “higher inflation for the first time in a generation.”

As of Wednesday’s market close, the 10-year yield was yielding 3.9%.

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