U.S. Treasury Yields Rise to Highest Level Since 2002, Two Strategists Turn Bullish

On October 7, U.S. long-term Treasury yields surged to their highest levels since 2002, prompting two long-time bears on sovereign bonds to shift their stance to bullish. Anatole Kaletsky, co-founder of Gavekal Research, expressed optimism this week about 10-year and 30-year U.S. Treasuries; Jim Bianco, founder of Bianco Research, also conveyed a positive outlook on long-term Treasuries for the first time last week. On Monday, the yield on the 10-year Treasury closed at approximately 5.31%, while the 30-year yield rose to 5.66%, both marking the highest closing levels since 2002. Bianco believes that after a prolonged sell-off, the current absolute yield on long-term Treasuries is attractive. The TLT, with a market size of about $47 billion, had declined for ten consecutive trading days but still recorded a net inflow of about $5.3 billion this year. Kaletsky has advised avoiding government bonds from major developed economies since 2022 but now thinks that U.S. interest rates may decline again in the future; Bianco believes that long bonds have hedging value if the economy weakens significantly or the stock market experiences a major correction. However, factors such as the U.S. fiscal deficit, Treasury supply, financing demands from AI companies, war expenditures, and rising energy prices may continue to push long-term yields higher.

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