BlackRock CIO Dumps Stocks for High-Grade Bonds. Here’s Why

BlackRock’s Rick Rieder is cutting stocks. He says high-grade bonds paying 7% to 8% now beat the 10% to 12% he expects from equities.

Rieder is chief investment officer of global fixed income at BlackRock and oversees about $2.4 trillion. He spoke on Yahoo Finance’s Sozzi Unleashed about the 10-year Treasury yield above 5%.

Why the US Treasury Yield Matters

The 10-year yield is the interest rate the US government pays to borrow for a decade. It shapes mortgage rates, company loans, and stock prices.

This month it rose above 5% for the first time since 2007. TradingView data shows it at 5.167% on Sept. 26, with the 30-year yield at 5.49%.

The Federal Reserve raised its benchmark rate to 3.75%–4% on September 16, its first hike in more than three years. Rieder called the moment “not a crisis, but an eye-opener.”

Rieder graded stocks a B-minus, lower than he had for a long time. He still likes chipmakers and memory storage, where he sees order backlogs. However, higher inflation-adjusted rates and slowing AI growth weigh on the rest of the market.

An income fund he runs yields 7.2% with an A-minus credit rating. It also holds bonds that mature or reset within three years, which limits losses if rates continue to rise. He has also sold some mortgage bonds, which lose value when rates climb.

Yields are already pushing mortgage rates to 7.45%. Rieder said the housing market is “frozen.”

What Another Fed Rate Hike Would Cost

Rieder argued the Fed should not be raising rates. Still, he expects one more hike. He warned it would inflate US debt costs.

“For every 100 basis points of move, it’s somewhere between 130 and 150 billion dollar cost to the US government,” he said in the interview.

One hundred basis points equals one percentage point.

Not everyone reads high yields as bad for stocks. Fundstrat’s Tom Lee argues rising yields favor strong companies.

Rieder added that when the 10-year starts at 5%, the next year’s bond return has averaged about 9.5%. Even so, he advised against rushing into it now. He pointed to strong growth, a war, and heavy new government borrowing.

He is now watching jobs reports for signs that US growth is slowing. BlackRock’s real-time tracking puts growth at 6.5% to 7%.