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February 01, 2018 at 02:33 PM
Pacific Investment Management Co.’s Dan Ivascyn and Mark Kiesel say 3% yields on 10-year Treasuries may be a signal to buy rather than the beginning of a bond bear market that other managers have warned about.
“There’ll be buyers of bonds if we back up to 3%,” Kiesel, Pimco’s chief investment officer specializing in credit, said during an interview at the firm’s Newport Beach, California, headquarters on Wednesday. “I’d consider buying bonds at that level, getting less defensive.”
(Related: No Sweeping Tax Reform, Infrastructure Spending Ahead: Pimco Exec)
Managers including DoubleLine Capital CIO Jeffrey Gundlach and Guggenheim Partners CIO Scott Minerd have said 3% rates on the 10-year would signal a bond bear market. The bull run remains intact unless the 3% level is broken, Minerd said in January, adding that the lows could be retraced before “a generational bear market” starts. “If you get above 3%, then it’s truly, truly game over for the ancient bond bull market,” Gundlach said on a Jan. 9 webcast.
The 10-year Treasury yield was at 2.73% as of 10:22 a.m. Thursday in New York, having briefly risen to a three-year high above 2.7519% on Wednesday. Yields have been rising because of global economic strength, central banks moving toward winding down their years of unprecedented bond buying and a climbing U.S. deficit.
Benchmark rates have jumped from last year’s low of 2.0387% on Sept. 7. Bond prices fall when yields climb.
‘Significant Rally’
Janus Henderson Group PLC’s Bill Gross has said a mild bond bear market was actually confirmed in early January, when the 10-year passed 2.5%.
