BlackRock’s Rieder Sees Scope for Two Fed Rate Cuts This Year

(Bloomberg) -- Bond investors confronting a painful run-up in yields in the past month may soon find relief from ebbing inflation and the Federal Reserve, according to BlackRock Inc.’s Rick Rieder.

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The asset manager’s chief investment officer of global fixed income told Bloomberg Television that he envisions the Fed being able to lower interest rates twice this year as inflation moderates in the months ahead.

“It’s getting harder for them to do that, but I still think they can,” he said Monday.

Read more: What Fed’s Rate-Cut Delay Means for US and World: QuickTake

Hotter-than-expected economic readings in recent weeks, particularly a report on March consumer prices, have pushed Treasury yields to their highest levels of 2024. Swaps traders have dialed back bets on Fed easing, meanwhile, and now see roughly 40 basis points of rate cuts by year-end, or less than two full quarter-point reductions.

Rieder said BlackRock has cut its own interest-rate exposure, weighting investments more to shorter maturities. Given the high yields available, that’s allowed the firm to earn income without the volatility associated with longer-duration investments — a strategy Rieder characterized Monday as “clip coupon and life is good.”

But as he sees it, the opportunity to extend out the yield curve is just a few data reports away.

“Once you get visibility on a couple of good inflation reports” and evidence of slowing employment, “then you can start to extend duration,” Rieder said.

--With assistance from Katie Greifeld, Tim Stenovec and Eric Balchunas.

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