BlackRock Inc.’s CEO Larry Fink expects 10-year Treasury yields to top 5% as shifts in geopolitics and supply chains make inflation more persistent.
(Bloomberg) — BlackRock Inc.’s CEO Larry Fink expects 10-year Treasury yields to top 5% as shifts in geopolitics and supply chains make inflation more persistent.
“My opinion is we’re going to have 10-year rates at least at 5% or higher because of this embedded inflation,” Fink said at the Berlin Global Dialogue forum on Friday. “We’re underestimating the change in geopolitics is so structurally inflationary.”
Fink is the latest Wall Street pundit to warn this week of the risk of higher rates and bond yields. Jamie Dimon, CEO of JPMorgan Chase & Co., said US interest rates could surge as high as 7% in a worst-case scenario, while Pershing Square Capital’s Bill Ackman is eyeing 30-year Treasury yields at 5%.
The comments come after the yield on 10-year Treasuries hit 4.68% on Thursday, the highest since 2007. The surge this year has been driven by aggressive Federal Reserve interest-rate hikes, with the latest move up caused by policymakers’ message that rates will stay higher for longer.
Added to that is a backdrop of increased US government borrowing to fund budget deficits, Fitch Ratings stripping the US of its top credit grade, and a surge in oil prices that has renewed fears about persistent inflation.
While BlackRock has previously warned of higher for longer rates, Fink said it’s unlikely the world will face a repeat of the “hyperinflation” of the 1970s when the US suffered double-digit price growth.
“I was a young bond trader during the late 70s where we had hyperinflation. I don’t think we’re going to have anything close to this inflation of the 70s,” he said. “But I would clearly say we are in a period of time with so many transitions, whether it’s a transition from deflation to inflation or a geopolitical transition. The fragmentation of supply chains is just beginning.”
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On politics, Fink said politicians should provide more hope to voters to help bolster confidence. Asked whether he’d run for president, the 70-year-old joked: “I’m too young.”
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