Bond managers say pace of rise in U.S. bond yields ‘unsettling’
The recent pace of the rise in yields in the U.S. Treasury market has been unsettling, according to several major bond fund managers who worry the market could be viewed as disorderly if the pace of rises continues.
Managers also cited some issues with liquidity as yields have moved upwards, with the 10-year Treasury yield up 80 basis points since January. It reached a 14-month high of 1.754% this week, fueled by the Federal Reserve’s pledge to keep monetary policy loose, boosting economic growth and inflation.
Some analysts have compared the rise in yields to the 2013 “taper tantrum”, when 10-year yields jumped 136 basis points to 3.06%, according to Rabobank.
“This isn’t a market for bond math and market geeks,” said Gregory Peters, head of multi-sector and strategy for PGIM Fixed Income. “It’s not so much the rise in interest rates as it is the volatility and swiftness that’s unsettling. There is real momentum around it.”
Peters, who initially estimated the 10-year yield would drift in range of 1.25%-1.5% this year, said there was a “momentum to take rates higher here from a markets standpoint in a way that I underappreciated.”
Yields have soared past market expectations. A Reuters poll in December of over 60 strategists showed they expected the U.S. benchmark yield to edge up to 1.2% in the following 12 months.
“(The 10-year yield) could go as high as 2% and that’s really not more than a few trading days away at this point,” said Gregory Whiteley, a portfolio manager at DoubleLine.
CNN Business/Anneken Tappe
Jobless claims are still higher than during the Great Recession a year after the pandemic started
A year after the pandemic shut down the US economy, America’s workers are still hurting. For the past 12 months, first-time claims for jobless benefits have been higher than during the worst moments of the Great Recession.
Economists, politicians and workers alike are hoping that the continued vaccine rollout and warmer weather that allows more outdoor social activities will help the economy heal at a faster pace in the coming months.
But, for now, improvements are still a bit harder to come by.
Last week, 770,000 Americans filed initial claims for unemployment benefits on a seasonally adjusted basis, the Department of Labor reported Thursday. It was an increase from the prior week and 70,000 claims more than economists had expected. It was also nearly 3 times as many claims as in the same week last year, just before the pandemic layoffs made benefit claims skyrocket.
Claims fell to their lowest level of the pandemic last November, at 711,000.
On top of that, 282,394 filed for benefits under the Pandemic Unemployment Assistance program open to the self-employed and gig workers last week. Added together, more than 1 million people filed for first-time benefits last week, without seasonal adjustments.
Continued claims, which count people who have filed for benefits for at least two weeks in a row, stood at 4.1 million adjusted for seasonal swings.
In total, more than 18 million American workers received benefits under the government’s various programs in the week ended February 27.
You have to be in gold, silver, platinum and palladium – Mark Mobius
Even if bond yields have room to move to 2%, investors should continue to hold precious metals as a long-term investment, according to one billionaire investor.
In an interview with CNBC, Mark Mobius, executive chairman of Templeton Emerging Markets Group and founder of Mobius Capital Partners, noted his long-term affection for precious metals. And not just gold, but silver, platinum, and palladium.
“You’ve got to be in these precious metals, simply because they represent a form of currency,” he said in the interview. “So I believe that those who are looking at gold and silver would be wise to have some of that in their portfolio.”
Mobius added that investors should hold about 10% of their portfolio in precious metals, particularly gold.
The gold market received a small boost Wednesday after the Federal Reserve signaled that it would be in no hurry to raise interest rates anytime soon, even as they raised their growth and inflation forecasts for 2021.
Although the yellow metal has given up some of its gains, prices are still holding well above critical support, around $1,700 an ounce. April gold futures last traded at $1,723.70 an ounce, down 0.23% on the day.