It’s a degree 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 degree since May 2001.
A serious a part of his thesis is constructed on the economic system’s power and resiliency.
“I don’t think the economy is hurt by 5% interest rates. I don’t think the economy is really hurt by 7%, maybe high 7%, mortgages,” the Bianco Research president mentioned on CNBC’s “Fast Money” on Wednesday. “I don’t think something is broken because of these rates.”
Bianco sees inflation bottoming round 3% and demand holding steady as catalysts for rebounding yields.
“You add the two together, you get 5.5%,” he mentioned. “That’s where I come up with 5.5% for the yield. That’s nominal GDP. The 10-year yield should approximate where nominal GDP is.”
Bianco thinks the charge on the 10-year Treasury will attain 5.5% as early as summer time. He accurately predicted last fall’s yield spike above 5%.
His newest forecast contains the influence of the Federal Reserve probably chopping interest rates three times this year.
“The Fed may be a little stickier in cutting rates. It doesn’t mean they won’t cut rates. It just might not be as aggressive as everybody says,” mentioned Bianco, who warned in late 2020 on CNBC that there can be “higher inflation for the first time in a generation.”
As of Wednesday’s market shut, the 10-year yield was yielding 3.9%.