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Black Rock says high U.S. bond yields provide investors with solid protection against falls

2026-07-23·newswire-us-stock-121400

Black Rock says high U.S. bond yields provide investors with solid protection against falls.

It said that while yields remain high, U.S. Treasury bonds are providing investors with strong protection against falling prices. BlackRock senior portfolio manager Chi Chen wrote in the firm's third-quarter fixed income outlook that both inflation and economic growth are expected to slow after the first half of this year.

This change, coupled with the broader impact of artificial intelligence and the evolving economic environment, is creating "richer investment opportunities" in fixed income markets. Chen said that the yield on U.S.

Treasury bonds within 10 years is well above 4%, and the yield on longer-term Treasury bonds is above 5%, which means that investors receive higher compensation for holding bonds. At the same time, current market valuations are "increasingly attractive." BlackRock's judgment comes as levels of 30-year U.S.

Treasury yields have some investors worried about rising debt and stubborn inflation. BlackRock said bond investors with a long-term view are better able to withstand losses. "Current yield levels provide a substantial buffer from further sell-off in interest rate markets," wrote Chen, who co-manages the $18 billion BlackRock Total Return Fund.

BlackRock estimates that 10-year Treasury yields would need to rise about 70 basis points from current levels for one-year total returns to be negative. "The market is pricing in a more hawkish Fed policy path than we expected," Chen wrote. BlackRock is the world's largest asset management company, with assets under management reaching US$15.3 trillion.

The firm laid out four potential return scenarios for the Bloomberg U.S. Treasury Index over the next 12 months. The report said that if the Fed remains unchanged, the index return is expected to be 6.4%; if interest rates are cut by 50 basis points, the return will rise to 7.2%.

If the Fed raises interest rates by 100 basis points, returns in the next year are expected to drop to 2.5%; if the economy falls into recession and the Fed cuts interest rates by 150 basis points, U.S. Treasury bonds may rise by 11.6%. So far this year, the Bloomberg U.S. Treasury Bond Index is down 0.5%.

July's sell-off left the index down 0.8% for the month as of Tuesday's close.

In addition, BlackRock fund managers said that at a time when inflation has been above the Fed's 2% long-term target for the past five years, new Federal Reserve Chairman Kevin Warsh "has recognized that credibility remains the central bank's most powerful policy tool." They said: "These statements ultimately need to be supported by actions, or confirmed by flattening inflation."

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Full text

Black Rock says high U.S. bond yields provide investors with solid protection against falls

It said that while yields remain high, U.S. Treasury bonds are providing investors with strong protection against falling prices. BlackRock senior portfolio manager Chi Chen wrote in the firm's third-quarter fixed income outlook that both inflation and economic growth are expected to slow after the first half of this year. This change, coupled with the broader impact of artificial intelligence and the evolving economic environment, is creating "richer investment opportunities" in fixed income markets. Chen said that the yield on U.S. Treasury bonds within 10 years is well above 4%, and the yield on longer-term Treasury bonds is above 5%, which means that investors receive higher compensation for holding bonds. At the same time, current market valuations are "increasingly attractive." BlackRock's judgment comes as levels of 30-year U.S. Treasury yields have some investors worried about rising debt and stubborn inflation. BlackRock said bond investors with a long-term view are better able to withstand losses. "Current yield levels provide a substantial buffer from further sell-off in interest rate markets," wrote Chen, who co-manages the $18 billion BlackRock Total Return Fund. BlackRock estimates that 10-year Treasury yields would need to rise about 70 basis points from current levels for one-year total returns to be negative. "The market is pricing in a more hawkish Fed policy path than we expected," Chen wrote. BlackRock is the world's largest asset management company, with assets under management reaching US$15.3 trillion. The firm laid out four potential return scenarios for the Bloomberg U.S. Treasury Index over the next 12 months. The report said that if the Fed remains unchanged, the index return is expected to be 6.4%; if interest rates are cut by 50 basis points, the return will rise to 7.2%. If the Fed raises interest rates by 100 basis points, returns in the next year are expected to drop to 2.5%; if the economy falls into recession and the Fed cuts interest rates by 150 basis points, U.S. Treasury bonds may rise by 11.6%. So far this year, the Bloomberg U.S. Treasury Bond Index is down 0.5%. July's sell-off left the index down 0.8% for the month as of Tuesday's close. In addition, BlackRock fund managers said that at a time when inflation has been above the Fed's 2% long-term target for the past five years, new Federal Reserve Chairman Kevin Warsh "has recognized that credibility remains the central bank's most powerful policy tool." They said: "These statements ultimately need to be supported by actions, or confirmed by flattening inflation."

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