Jim Bianco, president of Bianco Research and a bond bear for six years, has turned bullish on bonds. He says bond yields across five to 30-year maturities all sit at 5% or higher, a first in two decades.
He is adding exposure while a bond selloff keeps the 10-year Treasury yield near two-decade highs. His case is that higher yields reflect normal rates, not a broken market.
Why Did Bond Bear Jim Bianco Turn Bullish at 5%?
Bianco told CNBC‘s Fast Money that a 5% nominal economy follows from inflation near 3% and real growth near 2%.
Therefore, 5% Treasury yields sit in line with the economy’s pace, which he calls fair value from five years out.
Bianco says the 2010 to 2020 stretch of negative rates and money printing still shapes how investors read today’s yields.
“The answer might be there’s nothing wrong with the bond market.”
Jim Bianco, president of Bianco Research, speaking to CNBC
Bianco also told Bloomberg the selloff may have further to run, so he is adding bond exposure gradually.
What Could Still Break the Bond Bull Case?
Bianco sees borrowing by hyperscalers, the largest cloud and artificial intelligence (AI) spenders, as manageable. Corporate debt has shrunk relative to gross domestic product (GDP) over 10 to 15 years, he noted.
However, the strain sits in triple-C credits, some of the lowest-rated corporate debt. He named gaming, cable, and lottery operators. In contrast, single-B credits, a tier higher, have not moved.
Companies that refinanced at lower rates five years ago could face higher costs when that debt matures. Bianco sees no problem yet but is monitoring the risk.
Analyst Benjamin Cowen expects the 10-year yield to peak before mid-November, after its Oct. 1 high of 5.342%. He still sees long-term rates climbing over the next 10 to 20 years.
If 5% proves a durable baseline, Bitcoin (BTC) and other risk assets would face a higher Treasury hurdle.
