DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.

The benchmark 10 year US Treasury yield could climb to 6% for the first time since 2000, according to Dan Ivascyn, Chief Investment Officer at bond fund manager Pimco. He pointed to high oil prices, inflation concerns and mounting anxiety over the country’s growing public debt.

Ivascyn delivered the warning in comments to the Financial Times. His outlook raises the prospect of another punishing move in a government bond market that has already endured heavy selling pressure this year.

US Treasury yields serve as a yardstick for borrowing costs and asset prices around the world. A further jump would therefore carry consequences well beyond the Treasury market, potentially placing additional pressure on stocks and corporate bonds.

The 10 year yield has risen almost 120 basis points this year. It was trading slightly below the 5.34% level reached last week, which marked its highest point since 2002.

At a current level of 5.29%, the yield would need to make another sharp move to reach 6%. Ivascyn told the Financial Times on Friday that such an increase was “feasible” in the near term.

He cited several forces that could drive the yield higher, including hedge funds unwinding losing bond positions. Levered investors and recent technical pressures have also contributed to the potential for abrupt market moves.

“It is certainly possible, even from a short-term trading perspective, given that some of the activity we've seen in the last couple of weeks is tied to some negative technicals, some stop-out activity from the platform hedge funds and other levered investors. You can certainly get there,” Ivascyn said.

The warning comes after a year of surging yields and falling bond prices. Bond yields move in the opposite direction from prices, meaning the market’s selloff has pushed borrowing benchmarks sharply upward.

Ivascyn also warned that riskier assets could struggle if Treasury yields continue rising. Stocks and corporate bonds would be vulnerable as investors confront higher government borrowing yields and tighter market conditions.

A move to 5.5% or above would likely trigger “some decent weakness in risk markets, both credit and equity,” he said. That threshold is only modestly above the 5.29% level cited in the report.

The bond market’s strain has not been limited to the United States. Global bonds have faced heavy selling pressure this year as rising energy costs feed inflation concerns and the artificial intelligence boom supports economic growth.

Those forces have encouraged investors to position for an extended period in which interest rates remain higher for longer. That adjustment has sent yields soaring across global markets as bond prices have retreated.

The US 10 year Treasury yield recorded its biggest quarterly increase this century during the three months ending in September. The move demonstrates how quickly expectations around inflation, growth and interest rates have shifted in the bond market.

High oil prices remain central to Ivascyn’s concern because they are fueling worries about inflation. At the same time, the country’s growing public debt is adding another source of unease for Treasury investors.

The immediate risk is that losing positions are unwound rapidly, creating further technical pressure in an already weak market. Ivascyn’s comments indicate that such activity could push yields toward levels not seen in roughly a quarter century.

A 6% yield would represent a substantial increase from the present level and the first such reading since 2000. Even before that point, Ivascyn sees 5.5% as a level that could produce meaningful weakness across credit and equity markets.

The combination of expensive energy, inflation pressure, public debt worries and forced selling has created a difficult environment for bonds. With the 10 year yield already near its highest level since 2002, investors face the possibility that the historic selloff still has further to run.

DISCLAIMER: GoldInvestors.news is not a registered investment, legal or tax advisor or broker/dealer. All investment/financial opinions expressed by GoldInvestors.news are from the personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur.