- Jeff Rosenberg says he’s not ready to declare an end to the three-decade-old bull market in bond prices.
- The recent drop in bond prices — and accompanying rise in bond yields — may not be here to stay, says the chief fixed income strategist at BlackRock.
- Last week’s huge run-up in bond yields was blamed for the Dow, S&P 500 and Nasdaq logging their worst weekly losses in two years.
Jeff Rosenberg, chief fixed income strategist at BlackRock, told CNBC on Monday he’s not ready to declare an end to the three-decade-old bull market in bond prices.
The recent dramatic decline in bond prices — which move inversely to bond yields — is sparking discussion among market experts about a sea change.
Rosenberg is not one of them, saying “it’s a fool’s errand” to call an end to the bond bull because the drop in prices — and accompanying rise in yields — may not be here to stay.
“We think higher … [bond yields] are here for awhile,” Rosenberg acknowledged on “Squawk Box,” citing “a very good backdrop not only for U.S. growth but global growth.”
But in the long run, he continued, “there’s not really a huge inflation scare,” and concerns about the Federal Reserve increasing the fed funds rate more aggressively to keep inflation in check are overblown. “The market hasn’t really much moved off of the three to four hike pace” for all of this year, he added. “And that’s our expectation.”
The Fed raised the fed funds rate, the overnight loan rate that banks charge each other, three times last year. When the central bank increases its short-term rates, the most immediate impact on consumers is a higher cost for borrowing money.
Rather than Fed rates, Rosenberg believes supply and demand factors are playing more of a role in pushing bond yields higher — and thus prices lower.
The new tax reform law and the ambitious budget from President Donald Trump will need to be financed by issuing more Treasurys, he said, which adds additional supply at a time when the Fed has started to sell its massive portfolio of debt assets it acquired after the 2008 financial crisis.
The 10-year Treasury yield on Monday shot up to a new four-year high of about 2.9 percent.
Last week’s run-up in yields knocked stocks for a loop, with the Dow Jones industrial average, S&P 500 and Nasdaq logging their worst weekly losses in two years.
But equities started this week higher, building on Friday’s strong gains that pulled Wall Street out of correction territory.
A correction is defined as a decline of at least 10 percent over time from recent highs.