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BlackRock says there won't be a US recession, cut treasuries

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BlackRock Inc, the world's largest money manager, says investors should pare their Treasury holdings because the US will avoid a recession.

[SINGAPORE] BlackRock Inc, the world's largest money manager, says investors should pare their Treasury holdings because the US will avoid a recession.

"Economic indicators this week may show the US economy experienced a mild slowdown but is not headed for a recession," Richard Turnill, the global chief investment strategist, wrote in a report Monday on the company's website. Investors should have an "underweight" position in Treasuries, according to the report. New York-based BlackRock manages US$4.6 trillion.

US 10-year note yields were unchanged at 1.92 per cent as of 2:48 pm in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 per cent note due in February 2026 was 97 3/8.

Treasuries have fallen 0.7 per cent in March, heading for their first losing month this year, based on the Bloomberg World Bond Indexes. The market is sliding as the US economy shows signs of improvement, highlighted by a February jobs gain that was bigger than economists surveyed by Bloomberg projected.  Manufacturing increased in March, according to a Bloomberg survey of economists before an industry report Tuesday. Orders for durable goods fell in February, based on the surveys ahead of the government figures March 24. A private report the same day will show growth in the services industry this month, based on the responses.

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Quickening inflation will help push Treasuries down, said Hideaki Kuriki, a debt investor at Sumitomo Mitsui Trust Asset Management, which oversees US$59.5 billion.

"The American economy is recovering and American inflation is recovering," Kuriki said. "Treasury yields will go up." The difference between yields on 10-year notes and same- maturity Treasury Inflation Protected Securities, a gauge of trader expectations for consumer prices over the life of the debt, was 1.67 percentage points Monday. It was the highest level since August. It's still less than the average for the past decade of 2.08.

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