Bond Veteran Bianco Turns Bullish for First Time in Six Years as 5.2% Yield Offers Sufficient Cushion
nashnova research
Jim Bianco, who has been bearish on Treasuries since 2020, flipped bullish as the 10-year yield hit 5.27% — arguing that coupon income now provides enough buffer against further rate rises, tilting the risk-reward equation in bonds' favor.
Why turn bullish now after six years of bearishness?
Bianco started shorting bonds in 2020, when the 10-year Treasury yield bottomed at a record 0.3%. He stayed bearish ever since.
The trigger: Monday's jump to 5.27%, the highest since 2007.
This means → he is not calling the end of the sell-off. He believes that at around 5.2%, the coupon — the annual interest a bondholder collects — is thick enough to cushion further price drops, making it worth wading in.
What does "enough cushion" actually mean?
Per Bloomberg data, buying the 10-year at current levels means that even if yields rise to roughly 6% over the next year, price losses would be roughly offset by coupon income.
If yields fall 100 basis points instead, the price gain would be significantly larger than the loss from an equal rise.
In plain terms = upside outweighs downside. That is what Bianco calls "the bond math improving."
How is he positioning?
Bianco raised the duration — a measure of how sensitive a bond's price is to rate moves — of his actively managed bond index to over 6 years, above the Bloomberg U.S. Aggregate Bond Index's 5.7 years.
The index is tracked by a WisdomTree ETF with an expense ratio of 0.6%.
He is building the position gradually: "I'm tiptoeing into the market. If yields keep rising, I'll keep buying."
Is a 5% yield actually high?
Bianco argues that a long-term Treasury yield around 5% does not signal economic distress — it is closer to the historical norm.
Since yields peaked in 1981, the 10-year average has been roughly 5.3%, close to where it sits today.
In plain terms = he views the 2010–2020 zero-rate era as "the absurd outlier," not the benchmark. We are simply reverting to normal.
Why might the bond sell-off not be over?
Multiple forces keep pushing long-term yields higher: rising energy prices, large fiscal deficits, sticky inflation, and a resilient U.S. economy.
The AI infrastructure investment boom is adding financing demand, fueling concern over bond oversupply and rate levels.
This reflects a striking divergence: even as the Fed has been in a rate-cutting cycle, the 10-year yield keeps climbing — inflation and fiscal-supply fears are overpowering monetary policy itself.
What is the key variable to watch?
This month the Fed, under Chair Waller, raised rates for the first time since 2023, lifting the target range to 3.75%–4.00% and signaling possible further tightening.
Bianco's index has returned roughly 2.6% annualized since December 2023, slightly above the benchmark's 2.32%.
This means → whether yields stabilize near 5% or push toward 6% will determine if this call is a well-timed entry or a premature one.
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