Neuberger Berman warned against buying U.S. Treasury bonds on dips, saying the recent selloff could be the beginning of a "surprisingly sustained" move higher in yields.
The risk of the Federal Reserve pausing its interest rate reductions, heightened volatility and resilient U.S. growth as well as sticky inflation could push yields on five-year Treasury notes up to about 4.50% over the next three months, said Ashok Bhatia, the firm's co-chief investment officer for fixed income.
They're yielding about 4.13% now.
"Fixed-income investors ought to brace for more downside volatility," said Bhatia, with the risk that the U.S. five-year note returns to the highs from mid-2024. New York-based Neuberger Berman manages $510 billion.
Bonds have sold off over the past month, pushing the U.S. 10-year yield above 4% for the first time since early August, as investors pared back bets on aggressive easing given the U.S. economy remains robust.
