BlackRock Investment Institute say that after being underweight long-term U.S. Treasuries since late 2020, as we saw
the new macro regime heralding higher rates, they’ve tweaked their view:
- U.S. 10-year yields at 16-year highs
show they have adjusted a lot – but we don’t think the process is over. - We now turn
tactically neutral as policy rates near their peak. - The next step is not overweight: we
see investors demanding more compensation for bond risk and stay underweight
on a long-run, strategic horizon. - We downgrade high grade credit further
And:
- We now see about equal odds that Treasury yields swing in either direction. In other words, we see two-way volatility ahead.
- The Fed is likely nearing the end of its fastest hiking cycle since the 1980s after raising rates into restrictive
territory. - We still see the Fed holding policy tight to lean against inflationary pressures.