Rick Rieder, chief investment officer of global fixed income at BlackRock—where he manages approximately $2.4 trillion—is reducing his equity holdings. During an appearance on Yahoo Finance’s Sozzi Unleashed, he explained that high-grade bonds yielding 7% to 8% now outperform the 10% to 12% returns he anticipates from stocks.
Why the US Treasury Yield Matters
The 10-year yield represents the interest the US government pays on 10-year borrowing. It acts as a benchmark that influences mortgage rates, corporate loans, and equity valuations.
Earlier this month, the 10-year yield climbed above 5% for the initial time since 2007. According to TradingView figures, it reached 5.167% on Sept. 26, while the 30-year yield hit 5.49%.
On September 16, the Federal Reserve increased its benchmark rate to 3.75%–4%, marking its first rate hike in over three years. Describing the current environment, Rieder noted it is “not a crisis, but an eye-opener.”
Rieder assigned equities a grade of B-minus, marking a lower rating than he has given them in quite some time. While he remains favorable toward semiconductor manufacturers and memory storage firms due to their existing order backlogs, he points out that the broader market faces pressure from rising inflation-adjusted rates and decelerating artificial intelligence growth.
Meanwhile, an income fund managed by Rieder currently delivers a 7.2% yield backed by an A-minus credit rating. This portfolio includes bonds maturing or resetting within a three-year window, which helps mitigate potential losses if interest rates keep climbing. Concurrently, he has trimmed some of his holdings in mortgage bonds, an asset class that depreciates when rates rise.
With yields driving mortgage rates up to 7.45%, Rieder characterized the housing sector as “frozen.”
What Another Fed Rate Hike Would Cost
Although Rieder believes the Fed should refrain from further rate increases, he anticipates one additional hike and cautioned that it would drive up the expenses associated with servicing US national debt.
“For every 100 basis points of move, it’s somewhere between 130 and 150 billion dollar cost to the US government,” he said in the interview.
One hundred basis points is equivalent to one percentage point.
Not market participants interpret high yields as a negative indicator for equities. Tom Lee of Fundstrat contends that rising yields actually benefit financially robust corporations.
Rieder noted that historically, when the 10-year yield begins at 5%, the following year’s bond return averages roughly 9.5%. Even so, he cautioned against jumping into bonds immediately, citing robust economic growth, ongoing conflict, and massive new debt issuance by the government.
Presently, he is monitoring employment data to identify indicators of a slowing US economy. Real-time tracking models utilized by BlackRock currently estimate growth between 6.5% and 7%.
Frequently Asked Questions
Who is Rick Rieder?
Rick Rieder is the chief investment officer of global fixed income at BlackRock, where he oversees roughly $2.4 trillion in assets.
Why is BlackRock’s Rick Rieder cutting stocks?
He is reducing stock exposure because high-grade bonds yielding 7% to 8% now offer more attractive returns compared to the 10% to 12% he projects for equities, especially amid rising inflation-adjusted rates and slowing AI market growth.
How do rising Treasury yields impact the housing market?
Higher Treasury yields push mortgage rates higher—reaching 7.45%—which Rieder describes as freezing the housing market.
What is the financial impact of a 100 basis point rate move on the US government?
According to Rieder, every 100 basis point (one percentage point) shift costs the US government between $130 billion and $150 billion.
