Jim Bianco, the longtime bond bear and president and founder of Bianco Research, has turned bullish on U.S. Treasuries after the 10-year Treasury yield rose to its highest level since 2007. He said buying Treasuries at around 5.2% now comes with what he called a thick cushion, and that the risk-reward profile has improved even if yields move higher from here.
On Monday, the 10-year Treasury yield rose to 5.27%, a fresh high since 2007. Bianco then lifted the duration of the active bond index he manages to more than six years, above the Bloomberg U.S. Aggregate Bond Index’s 5.7 years. The index is tracked by an ETF under WisdomTree.
Why Bianco says the math now looks better
Bianco’s shift does not amount to a call that the Treasury selloff is about to end. His argument is that at current yield levels, bond math has become more favorable.
According to data compiled by Bloomberg, buying the 10-year Treasury at current levels would still make sense even if the yield rises to about 6% over the next year, because the price loss would be roughly offset by coupon income. On the other side of the trade, if yields fall by 1 percentage point, the price gain would be meaningfully larger than the loss caused by a 1 percentage point increase in yields.
“This is a value-investing opportunity. If yields continue to rise, I will keep buying,” Bianco said. He also said the bond selloff may not be over, which is why he is building positions gradually instead of making a one-shot aggressive bet. “I’m probing my way into the market.”
First bullish Treasury call in six years
Bianco had stayed bearish on bonds since the 10-year Treasury yield fell to a record low of 0.3% in 2020. This latest shift marks his first return to a bullish Treasury stance in six years.
He is not arguing that the market has fully cleared. His point is that after the sharp rise in yields, the risk-return setup for long-dated Treasuries no longer looks like it did during the low-yield era.
Fiscal pressure, sticky inflation and economic resilience
Recent Treasury selling has been driven by several forces cited in the report: rising energy prices, large fiscal deficits, sticky inflation and continued resilience in the U.S. economy. Financing demand tied to the boom in AI infrastructure investment has also added to market focus on bond supply and interest-rate levels.
Bianco said the divergence between Federal Reserve policy and long-term Treasury yields stands out. Over a recent period, the 10-year Treasury yield kept rising even while the Fed was in a rate-cutting cycle, showing that market concerns about inflation, economic growth and fiscal supply were outweighing the direct effect of monetary policy.
This month, under Chair Warsh, the Federal Reserve raised rates for the first time since 2023, lifting the federal funds target range to 3.75% to 4.00% and signaling the possibility of more tightening.
He has already acted on the view
Bianco’s shift has already shown up in the bond index he manages. He raised the duration of the index tracked by the WisdomTree Bianco Total Return Fund to more than six years, increasing the portfolio’s sensitivity to rate moves.
The ETF tracks an actively managed bond index launched by Bianco in 2023. Since December 2023, the index has delivered an annualized return of about 2.6%, slightly above the Bloomberg U.S. Aggregate Bond Index’s 2.32%. The ETF carries an expense ratio of 0.6%.
“We are returning to normal”
Looking over a longer period, Bianco said long-term Treasury yields around 5% do not necessarily signal an economy in distress and are closer to a historical norm. He noted that since yields peaked in 1981, the average level for the 10-year Treasury yield has been about 5.3%, close to where it stands now.
“We are returning to normal,” Bianco said. He added that “the zero-rate period from 2010 to 2020 was the absurd outlier.”
The report was written by Li Jia for Wallstreetcn and republished by TechFlowPost.
