BlackRock: Long-term U.S. Treasury crisis looms in 2025, short-term bonds become "hot cakes"
BlackRock fixed income portfolio managers stated that holding long-term interest rate exposure "looks very risky" in 2025. According to BlackRock's 2025 investment direction report, analysts favor 3 to 7-year U.S. Treasury bonds as they focus on yield and returns rather than duration and spreads. BlackRock highlighted the iShares 3-7 Year Treasury Bond ETF (IEI) and iShares Flexible Income Active ETF (BINC). Amanda Lynam, Head of Macro Credit Research at BlackRock, stated, "Robust economic growth and potential inflationary policy measures have diminished our enthusiasm for long-term bonds." BlackRock analysts also expect that the widening U.S. federal deficit will lead to an increase in new U.S. Treasury bond issuance, particularly long-term U.S. Treasuries. This will help maintain stable interest rates. They also anticipate that term premiums will normalize, "potentially pushing the 10-year rate up by 1.3%." Finally, the Federal Reserve's quantitative tightening policy may negatively impact long-term bond yields. "The Fed may choose to reinvest the proceeds from maturing mortgage-backed securities more into shorter-term securities," Lynam stated
According to the Zhitong Finance APP, BlackRock fixed income portfolio managers stated that holding long-term interest rate exposure "looks very risky" in 2025. According to BlackRock's 2025 investment direction report, analysts favor 3 to 7-year U.S. Treasury bonds, as they focus on yield and returns rather than duration and spreads.
BlackRock highlighted the iShares 3-7 Year Treasury Bond ETF (IEI) and iShares Flexible Income Active ETF (BINC).
Amanda Lynam, Head of Macro Credit Research at BlackRock, stated, "Robust economic growth and potential inflationary policy measures have diminished our enthusiasm for long-term bonds."
BlackRock analysts also expect that the widening U.S. federal deficit will lead to an increase in new U.S. Treasury bond issuance, particularly long-term U.S. Treasury bonds. This will help keep interest rates stable. They also anticipate that term premiums will normalize, "potentially causing the 10-year rate to rise by 1.3%."
Finally, the Federal Reserve's quantitative tightening policy may negatively impact long-term bond yields. "The Fed may choose to reinvest the proceeds from maturing mortgage-backed securities more into shorter-term securities," Lynam stated