Pimco flags risk of 10-year Treasury yield climbing to 6%

The call marks a sharp turn from comments by a Pimco senior advisor just days earlier, who called Treasury yields "screaming good value."

The firm manages about $2.33 trillion, according to Bloomberg.

The 10-year yield stood at 5.28% on October 7, according to Federal Reserve Board data published via FRED. StreetStats, a Treasury yield curve tracker, put the yield at 5.24% on October 8, down 5 basis points on the day, with the 30-year yield at 5.61%.

The call sits awkwardly next to other recent remarks from Pimco. On October 6, senior advisor Rupert Harrison said Treasury yields were "screaming good value" after their recent surge, according to Reuters. In its own six- to twelve-month outlook, published the same day, Pimco said it still favours five- to seven-year Treasurys and is growing "more constructive on longer-dated bonds as yields rise," according to a summary by Briefs.co. Last month, Chief Investment Officer Dan Ivascyn said yields above 5% had led the firm to cut its underweight position in longer maturities, Briefs.co reported. Pimco co-founder Bill Gross said this week that yields above 5% still do not adequately compensate investors for duration risk, pointing to rising government borrowing and weaker foreign demand, according to Yahoo Finance.

The shift in tone marks a break from the firm's position just weeks earlier, when a senior advisor called the same yields good value after their rise. It points to growing concern inside one of the largest bond managers that fiscal and supply pressures could outweigh the valuation case that had drawn buyers in. A call for a return to levels last seen in 2000, from a major Treasury holder, suggests less confidence that long-dated yields have peaked, and raises the risk of further declines in long-dated Treasury prices if that view spreads among other large holders.