Pimco warns that US 10-year Treasury yields could surge to 6 per cent for the first time since 2000, driven by fears over high oil prices, inflation, and America’s soaring public debt. Dan Ivascyn, chief investment officer at the bond giant, said a further rise from the current 5.29 per cent is “feasible,” citing forced selling by hedge funds and levered investors. The benchmark yield, which influences trillions of dollars in global assets, is already at levels not seen since the turn of the millennium.
Inflation concerns are fueled by Donald Trump’s Iran war, massive AI company borrowing, and strong economic growth. Rising yields have pushed US 30-year mortgage rates to 7.4 per cent, the highest since 2023, increasing pressure on households ahead of critical midterm elections. Ivascyn warned that yields hitting 5.5 per cent or above would weaken risk markets, including stocks and corporate bonds.
Low-rated corporate bond borrowing costs have already hit 17 per cent, the highest since May 2020. Higher yields may also cause “slow motion” problems in private markets like commercial real estate. However, elevated yields could eventually attract investors seeking high returns, limiting further increases.
Pimco also sees opportunities in overseas debt, highlighting Australia’s high-quality credit and the UK’s yield premium.
Source: Financial Times Markets · Summarized by HeadlinesBriefing