Like most financial experts, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, expects the Federal Reserve to begin raising interest rates around the middle of next year.
But unlike some others, he doesn't think the rate hikes will send long-term bond yields soaring. That's because he expects the rate moves to be slow and gradual.
"We think that we will be in a low-rate dynamic for a very long time,"
he told USA Today.
The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent for six years.
"We are at zero percent on fed funds rate, and a 0 percent rate suggests emergency conditions," Rieder said. "But we are far from emergency conditions. U.S. GDP growth the last two quarters has come in at around 4 percent or higher."
Rieder expects the fed funds rate target to end next year at 1 percent.
He sees fair value for the 10-year Treasury yield at 2.75 to 2.80 percent, compared to Friday afternoon's level of 2.10 percent.
Meanwhile, hedge fund star Paul Singer, founder of Elliott Management, is highly critical of the Fed. Its monetary stimulus may have helped spark an economic recovery, but it's an "unfair recovery, a distorted recovery," he said at a New York conference Thursday,
CNBC reports.
The Fed's accommodation has artificially lifted financial markets, Singer said. And gains in those markets disproportionately benefit the wealthy.
Bonds are "very over-priced for the risk-reward," he said.
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