Jim Bianco, President and Macro Strategist at Bianco Research, said in a CNBC interview that, with yields rising, bonds are finally trading at a fair value, making it a good time to invest in them.

  • The strategist noted that hyperscaler debt has impacted bond markets, but argued it has largely been factored in. 
  • He also said that there might be nothing wrong with the bond market, and that everything is as it is supposed to be.
  • The U.S. 10-year Treasury yield hit a 24-year high of 5.364% on Wednesday.

The U.S. 10-year Treasury yield hit a 24-year high of 5.364% on Wednesday, reaching its highest level since early 2002. 

Long-term bond market bear Jim Bianco, President and Macro Strategist at Bianco Research, believes that as yields rise, bonds are finally trading at fair value, making it a good time to invest in them. 

Why Bond Markets Are Providing Fair Value, As Per Bianco

In an interview with CNBC, Bianco said yields of 5% or more across the five- to 30-year Treasury curve reflect an economy with roughly 3% inflation and 2% real growth, putting nominal rates around 5%. 

“So if you have a 5% economy and you have 5% interest rates, that's fair value. And that's why after six years, I finally said, okay, now's the time to start moving back into the bond market,” he said. 

Bianco said these bonds now offer fundamentally appropriate interest-rate levels, making bonds attractive again after years of being expensive.

Bianco Emphasizes There’s Nothing Wrong With Bond Markets 

The strategist noted that hyperscaler debt has impacted bond markets, but argued it has largely been factored in. 

He also said that in the last 10-15 years, corporate debt as a percent of GDP has been falling as corporations have been deleveraging for a long time.

However, at present, hyperscalers and the AI trade in general are starting to take on more debt, but he believes the market can handle it.  “There's definitely higher yields for those bonds. And they've got higher expected returns. So they can handle that as well too,” he said. 

Bianco said the 2010–2020 era of near-zero or negative rates and money printing was an unusually abnormal period in financial history.

“Now what we see is pretty normal. And we're just so anchored to that period of ten years ago and thinking, oh yeah, we're going to go back to zero. We're going to go back to money printing or something like that. No, I think that era is over. And now what we're looking at is normal interest rates,” he said. 

“The answer might be there's nothing wrong with the bond market. This is where everything is supposed to be,” he added. 

How Bond Markets Have Been Reacting 

Along with 10-year Treasury yields, 30-year yields have also climbed to multi-decade highs in recent weeks. At the time of writing, yields on 30Y bonds were 5.69%. 

The iShares 20+ Year Treasury Bond ETF (TLT), which tracks the investment results of long-term U.S. Treasury securities beyond 20-year maturities, is down more than 11% year to date. 

On Stocktwits, retail sentiment around TLT dipped from ‘bullish’ to ‘neutral’ over 24 hours. 

One user said, “$TLT real yield now super duper high, gov will do something very soon.”

Meanwhile, the iShares 10-20 Year Treasury Bond ETF (TLH) is down nearly 10% in the same period. TLH was in the ‘neutral’ sentiment territory at the time of writing. 

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