Market Forecaster Jim Bianco Warns of 5% Bond Yields Surge

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According to Wall Street analyst Jim Bianco, Treasury yields are anticipated to climb substantially, potentially surpassing the 5% mark within the next few weeks. Bianco Research’s president emphasized on Tuesday that the ongoing movement in the bond market is far from reaching its conclusion.

Bianco cautioned that if the Federal Reserve signals a cessation of interest rate increases amid persistent investor concerns about inflation, the demand for bonds may diminish. He attributed the weakening bond market to the Fed’s discussions surrounding the completion of rate hikes and its contemplation of the impact of the previous rate adjustments.

Yields on the 5-year, 10-year, and 30-year Treasury notes hit their highest levels since 2007, with the 10-year Treasury yield peaking at 4.8% on Tuesday. Bianco considers 4.5% to be a reasonable fair value for yields at the moment, indicating a slight deviation from the current levels.

The upheaval in the bond market is beginning to spill over into the stock market, with the Dow Jones Industrial Average experiencing its most significant daily downturn since March and now recording negative performance for the year. The S&P 500 and the Nasdaq Composite also closed more than 1% lower on the same day.

The recent concerns over escalating yields emerged after editor Rick Santelli issued a cautionary statement to investors on “Fast Money.” Santelli suggested that there is still considerable room for yields to rise. While Santelli speculated a potential increase to as high as 13.5% to 14% in the next seven years, Bianco regarded such high yields as an extreme scenario, implying that it would require a significantly adverse situation, more severe than his current expectations, to materialize.