Pimco’s Ivascyn says 10-year Treasury yield could hit 6%

The benchmark 10-year US Treasury yield could climb to 6% for the first time since 2000, Pimco Chief Investment Officer Dan Ivascyn told the Financial Times. He pointed to high oil prices that are feeding inflation fears and to growing concern over US public debt. His comments add to worries that the bond market selloff this year is not over, and that rising borrowing costs could start to hurt stocks and corporate credit.ft+1

A "feasible" move

Ivascyn told the FT that a sharp rise from the current level of 5.29% was "feasible" in the near term. He tied part of the recent rise to market mechanics rather than economic data alone, Reuters reported.reuters+1

> "It is certainly possible, even from a short-term trading perspective, given that some of the activity we've seen in the last couple of weeks is tied to some negative technicals, some stop-out activity from the platform hedge funds and other levered investors. You can certainly get there," he said.reuters

He warned that higher yields could weigh on riskier assets. A move to 5.5% or above would likely bring "some decent weakness in risk markets, both credit and equity," he said.economictimes+1

A year of rising yields

The 10-year yield has risen almost 120 basis points this year. It is trading just below the 5.34% level it reached last week, its highest since 2002. Reuters said the yield posted its biggest quarterly increase of the 21st century in the three months to September. FT market data showed the yield edging lower in early trading on Friday.economictimes.indiatimes+2

Higher energy costs have pushed global bonds down by raising expectations that interest rates will stay high for longer. Growth expectations tied to the artificial intelligence boom have added to concern that central banks have little room to cut rates quickly. The pressure is reaching other markets as well. The FT's bonds coverage this week reported that US mortgage rates rose for a seventh straight week to their highest since 2023, and that investors were buying eurozone bonds after a selloff in France.markets.ft+1

Pressure on borrowers and valuations

Treasury yields set the benchmark for borrowing costs and asset prices around the world. When yields rise, safe government debt becomes more attractive compared with stocks. Rising yields also lower the present value of future corporate earnings and increase refinancing costs for heavily indebted companies.economictimes.indiatimes+1

Ivascyn helps oversee investments at one of the world's largest bond managers. His comments show that some major fixed-income investors now see a 6% yield as a real possibility, a level the market has not seen in 26 years.reuters+1