BlackRock: Fed Interest Rate Pause a “Green Light” For Investors

MANHATTAN, NEW YORK, UNITED STATES – 2021/05/25: BlackRock offices in New York City. Founded in 1988, BlackRock, Inc. is an US multinational investment management corporation. The corporation is the world’s largest asset manager, with $8.67 trillion in assets under management as of January 2021. (Photo by Erik McGregor/LightRocket via Getty Images)

Jeffrey Rosenberg, the systemic multi-strategy fund portfolio manager at BlackRock, says that the FED’s decision to not raise interest rates Wednesday marks a “green light” for investors. According to Rosenberg, the Fed “is very happy with what they’ve seen,” and “you can’t really fight this until there is some kind of fundamental data from the economy side that pushes back.”

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Yields across the maturity spectrum tumbled, led by short maturities that are most sensitive to changes in monetary policy. The two-year notes plunged as much as 31 basis points to 4.42%. On the other end, the five-year notes fell below 4%, becoming the first Treasury security to pay a rate that low since August.

Asked about the sharp rise in long-term Treasury yields — with the 10-year Treasury note on Thursday coming within less than a basis point of the psychologically important 5% threshold, Powell said the rise didn’t appear to be fueled by expectations for higher inflation or further Fed rate hikes.

“It’s really happening in term premiums, which is the compensation for holding long-term securities, and not principally a function of the market looking at near-term fund rates,” Powell said during the question-and-answer session following his speech to the Economic Club of New York.

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Wednesday’s announcements followed the release of producer price data for November that showed less inflation than expected, which led traders to price in slightly more easing in 2024. The Green Light for Investors from today’s interest rates announcement may convince investors to hold onto the bull, the BlackRock manager says.