Chief fixed income strategist expects the Fed to stick to its plan to raise interest rates for the first time in 2023
But given the outlook for economic growth, Thiel recommends reducing its holdings of US Treasuries to cope with interest rate risk
Blackrock, the largest asset management company in the worldThe chief fixed income strategist said that given all signs that the inflation threat would be temporary, the bond market priced the Fed rate hike "too high".
"We believe the Fed will raise interest rates more slowly than currently expected by the market," Blackrock's Scott Thiel said in an interview.
Blackrock strategists expect the Fed to stick to its plan to raise interest rates in 2023, as shown in the bitmap. This runs counter to the pricing in the money market. The market believes that due to supply chain bottlenecks, raw material shortages, high commodity prices and other factors are fuelling inflation, the Fed will raise interest rates by 28 basis points by September next year.
The global bond market sell-off accelerated on Monday, with the yield on 10-year Treasuries climbing to 1.6%. Traders last week raised the expected probability of raising interest rates to nearly 50 per cent in June or before next year, coinciding with the end of the Fed's forecast of a reduction.
But Thiel said policy makers may not pay too much attention to the inflationary pressures caused by the outbreak.
"in view of what we saw, Qualcomm Inc,The level of inflation is obviously very heated right now, "Thiel said. "I believe that high inflation will stay with us for some time, but gradually it will slow down."
This is not to say that Thiel told customers to buy Treasuries. The opposite is true. He expects the sell-off in Treasuries to continue, but at a more cautious pace, suggesting reducing Treasury holdings to cope with interest rate risk. He believes that there is still room for growth in the US economy, which is not reflected in the current level of yields.
"We will see yields rise over time, in part because we think yields are in the wrong position, given the level of economic activity we are seeing," Thiel said. "so interest rates will continue to rise, though not as violently as they have been in the past two weeks."
