As Treasury yields reach multi-year highs, Bianco Research president Jim Bianco is adding to his bond exposure after years of bearish views. He argues that yields of 5% or more on U.S. Treasuries with maturities from five to 30 years—an occurrence not seen in roughly two decades—may reflect a return to more normal interest rates rather than a malfunction in the bond market. A sustained 5% rate would also remain an important yield benchmark for risk assets such as bitcoin.
Bianco sees 5% yields in line with inflation and growth
In a television interview, Bianco said inflation near 3% and real economic growth of about 2% would imply nominal growth of roughly 5%. On that basis, Treasury yields around 5% are consistent with the pace of the economy and could represent a fair level for interest rates over the next several years.
He said the period of negative rates and monetary easing from 2010 to 2020 continues to shape investors’ expectations for yields today. In his view, markets may need time to adjust to rates returning to a more normal range; the bond market is not necessarily broken.
Bianco does not consider the recent sell-off over. Bond prices could face further pressure, so he is increasing his exposure gradually rather than making a single large allocation. The 10-year Treasury yield has recently hovered near its highest level in almost 20 years, keeping the bond market’s repricing in focus.
CCC-rated borrowers face refinancing questions
Bianco said borrowing by major cloud-service providers and AI companies remains manageable. Corporate debt as a share of gross domestic product has declined over the past 10 to 15 years, he noted.
His greater concern is the weakest-rated part of the credit market, particularly CCC-rated corporate debt. Issuers in sectors including gaming, cable television and lottery operations are among those he is watching. Single-B-rated bonds, one notch higher, have not shown the same clear signs of strain.
Some companies refinanced about five years ago when interest rates were lower. As that debt comes due, refinancing in today’s higher-rate environment could raise their borrowing costs. Bianco said the pressure has not yet become widespread, but he will continue monitoring these issuers’ ability to service and refinance their debt.
The 10-year yield remains a benchmark for bitcoin
Analyst Benjamin Cowen expects the 10-year Treasury yield could peak by mid-November. It reached 5.342% on October 1. Cowen also believes long-term interest rates could continue rising over the next 10 to 20 years.
If Treasury yields near 5% persist, investors weighing bitcoin (BTC) and other risk assets will have a higher risk-free yield benchmark to consider. The questions are not only whether yields have peaked in the near term, but also whether lower-rated companies can manage the higher cost of refinancing.