Jim Bianco, Longtime Bond Bear, Now Bullish on Bonds as 5% Yields Seen as Fair

The president of Bianco Research, Jim Bianco, who maintained a bearish stance on bonds for six years, has shifted to a bullish position. He reports that yields across maturities from five to 30 years are all at 5% or above, a milestone not recorded in two decades.

Bianco is increasing his bond holdings while a selloff keeps the 10-year Treasury yield near its highest point in two decades. His argument is that the higher yields indicate a normalization of rates rather than a broken market.

The Reason Behind Jim Bianco’s Bullish Turn at 5% Yields

On CNBC’s Fast Money, Bianco explained that a 5% nominal economy results from roughly 3% inflation and 2% real growth.

Consequently, he views the current 5% Treasury yields as consistent with the economy’s pace, calling them fair value over a five-year horizon.

Bianco noted that the 2010-to-2020 period of negative rates and quantitative easing still influences how investors perceive today’s yields.

“The answer might be there’s nothing wrong with the bond market.”

That comment came from Jim Bianco, president of Bianco Research, during his appearance on CNBC.

Bianco also told Bloomberg that the selloff might have further to go, so he is gradually adding bond exposure.

Potential Threats to the Bond Bull Thesis

Bianco views borrowing by hyperscalers—the largest spenders on cloud and artificial intelligence (AI)—as manageable. He noted that corporate debt has decreased relative to gross domestic product (GDP) over the past 10 to 15 years.

However, pressure is concentrated in triple-C credits, some of the lowest-rated corporate bonds. He mentioned gaming, cable, and lottery operators specifically. By contrast, single-B credits, one tier higher, have not budged.

Companies that refinanced at lower rates five years ago could face higher costs when those debts mature. Bianco said there is no immediate problem but is monitoring the risk.

Analyst Benjamin Cowen expects the 10-year yield to peak before mid-November, after its Oct. 1 high of 5.342%. He also predicts that long-term rates will rise over the next 10 to 20 years.

If 5% proves a durable baseline, Bitcoin (BTC) and other risk assets would encounter a higher Treasury hurdle.