It’s a stage 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 12 months — its highest stage since May 2001.
A significant a part of his thesis is constructed on the economic system’s energy and resiliency.
“I do not suppose the economic system is damage by 5% rates of interest. I do not suppose the economic system is basically damage by 7%, perhaps high 7%, mortgages,” the Bianco Research president mentioned on CNBC’s “Fast Money” on Wednesday. “I do not suppose one thing is damaged due to these charges.”
Bianco sees inflation bottoming round 3% and demand holding secure as catalysts for rebounding yields.
“You add the two collectively, you get 5.5%,” he mentioned. “That’s the place I provide you with 5.5% for the yield. That’s nominal GDP. The 10-year yield ought to approximate the place nominal GDP is.”
Bianco thinks the charge on the 10-year Treasury will attain 5.5% as early as summer season. He accurately predicted last fall’s yield spike above 5%.
His newest forecast contains the influence of the Federal Reserve doubtlessly slicing interest rates three times this year.
“The Fed could also be a little stickier in slicing charges. It doesn’t suggest they will not lower charges. It simply won’t be as aggressive as everyone says,” mentioned Bianco, who warned in late 2020 on CNBC that there could be “increased inflation for the first time in a era.”
As of Wednesday’s market shut, the 10-year yield was yielding 3.9%.