Wilson Center (Creative Commons Attribution-Share Alike 3.0 Unported license).
Speaking at different forums, Wall Street titans Bill Ackman and Larry Fink both said they do not see inflation coming down any time soon, and they expect to see US Treasury yields soon hit 5%.
Ackman, the CEO of Pershing Square Capital, said Thursday at the Delivering Alpha 2023 conference, organized by CNBC, that he expects to see inflation remain persistently higher, as he pointed out that at 4%, US Treasury yields are still low on a historical basis.
He said, “I would not be shocked to see 30-year rates well through the 5[%] barrier, and you could see the 10-year approach 5. And that could happen in the very short-term. Like literally weeks.”
After surging to its highest point since 2007 earlier in the week, the 10-year yield had pulled back to 4.565% on Friday. At the same time, the 30-year yield slid to 4.697%.
Meanwhile Blackrock CEO Larry Fink noted that due to the tense geopolitical situation and the fragmentation of trade norms, structural inflation will continue to be a problem.
At the Berlin Global Dialogue Forum on Friday, he said, “We’re gonna have 10-year rates at least at 5% or higher, because of this embedded inflation. This structural inflation is unlike anything, and I think business leaders and politicians are not providing the foundation to help explain this. We have not seen inflation like this in over 30 years.”
JPMorgan CEO Jamie Dimon was also issuing warnings over sticky inflation pressures this week, noting elevated federal spending and the growing costs of the energy transition.
He added that to counteract this, the Federal Reserve is going to have to continue to tighten its monetary policy, and he saw a fed funds rate of 7% as a real possibility.
That could maintain US Treasury yields higher since they move off the Fed rate-policy expectations.
Other commenters have also forecast higher yields, especially given the imbalance which exists in supply and demand in the Treasury market.
“Bond King” Bill Goss pointed out in a note last week that the 10-year Treasury is priced for a world of 2% inflation, which means that even if the Fed can bring inflation back to its pre-pandemic levels, the yield is likely to continue to sit at or above 4%.
