PIMCO says U.S. Treasury yields may rise further as Fed tightening risk persists
Bond markets are still facing the possibility of higher U.S. Treasury yields as investors assess whether the Federal Reserve has finished raising interest rates. PIMCO Chief Investment Officer Dan Ivascyn says the central bank is likely to hold rates steady later this month, but still sees room for one or two additional increases before the cycle ends.
Highlights
- PIMCO's Ivascyn anticipates U.S. Treasury yields could rise as the Federal Reserve may deliver one or two more rate hikes before ending tightening.
- Ivascyn expects the Fed to leave rates unchanged this month but indicates policymakers likely have room for at least one additional increase in 2023.
- PIMCO's view suggests continued upward pressure on policy rates and Treasury yields, keeping fixed-income investors focused on Fed signals and inflation trends.
Fed outlook points to further yield pressure
As reported by Reuters, Ivascyn says U.S. Treasury yields may have further room to rise because the Federal Reserve is likely to deliver one or two more rate increases before the current tightening cycle ends.Speaking on the sidelines of Grant's Fall Conference in New York on Tuesday, he says he expects the Fed to leave rates unchanged later this month. At the same time, he says policymakers probably still have scope to tighten once more this year, with PIMCO's own view pointing to one to two additional moves given the current outlook.
Implications for bond investors and markets
The comments suggest fixed-income investors are still navigating a market in which policy rates and benchmark Treasury yields may remain under upward pressure. For the bond sector, that keeps attention on Fed signals, inflation trends and the timing of any eventual end to the current tightening phase.PIMCO, the world's largest bond manager, is closely watched by market participants for its views on rates and portfolio positioning. Ivascyn's remarks indicate the firm does not yet see the policy cycle as fully complete, even if the Fed pauses in the near term.
Our earlier report on rising government borrowing costs explained that higher benchmark 10-year yields across major developed economies are increasing refinancing pressure and making it harder for governments to stabilise public debt. It highlighted mounting fiscal strain in countries such as France, the U.S. and the UK as yields sit well above the average interest rate on outstanding debt.
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