December rate decisions in Japan and US cast shadow over bitcoin
Japan's core inflation rose above the BOJ's 2% target for the first time in nine months, strengthening the case for a December rate hike as bitcoin trades…
BlackRock's Rick Rieder sees a historic opportunity to earn crisis-level yields in high-quality bonds without a crisis, favoring investment-grade corporates…
Rieder's view adds weight to the argument that higher yields are now pulling large investors back into fixed income, potentially helping to absorb the wave of AI-related corporate issuance that has weighed on credit markets. Support from the world's largest asset manager could help stabilise spreads on hyperscaler bonds in particular, while debt tied to data centres without hyperscaler backing looks set to remain under pressure. On Treasuries, his warning that rates could still rise, along with his concern over government debt costs and crowding out from AI supply, suggests the case for buying bonds rests on income rather than price gains. With markets pricing a roughly 90% probability of a Fed rate hike in December, the main near-term risk to the trade is an upside inflation surprise. Higher oil prices remain a key driver of that risk.
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The bond chief at BlackRock said investors are receiving yields typically seen during a crisis even though no crisis exists, and that the hyperscalers flooding the market with debt are among the borrowers he most wants to lend to.
Key takeaways from the interview:
Rick Rieder of BlackRock said that despite volatility in parts of the credit market, investors have a historic opportunity to lock in attractive yields in high-quality bonds. He named investment-grade corporate debt as his preferred area for the first time in a long while.
Speaking to CNBC about his fourth-quarter outlook, Rieder, the global fixed income CIO at the world's largest asset manager, said investors could in theory build a diversified portfolio yielding more than 7%, with less than three years of duration and an average A- credit rating. Duration measures a bond's sensitivity to interest rate changes, so a shorter duration means less price risk if yields rise.
Rieder argued that yields at these levels usually appear only during an economic or default crisis. That is not the case now, he said, because the economy remains strong and he does not expect significant defaults.
Among his top opportunities are bonds from hyperscalers—the large tech companies building AI infrastructure. According to LSEG data, Alphabet, Amazon, Meta Platforms and Oracle have together issued around $228 billion in bonds this year as of October 20. Rieder said these companies carry low leverage and strong cash flow, meaning investors get an attractive yield for lending to high-quality borrowers. His iShares Flexible Income Active ETF has raised its investment-grade corporate allocation to about 14%, from 8.5% in July.
He urged patience, warning that rates could still move higher. He argued that the starting yield is the best guide to returns for investors holding for a year or more. He also stressed caution outside investment grade, including parts of data centre financing that lack hyperscaler guarantees or backing.
These remarks follow BlackRock's move last week to upgrade short-dated US Treasuries to overweight, on the view that markets had overpriced Federal Reserve tightening. Rieder's enthusiasm for investment-grade credit stands in contrast to the BlackRock Investment Institute's recent research, which had steered away from the asset class because of heavy AI-related issuance.
On policy, Rieder expects the Fed to raise rates in December, with markets pricing that outcome at close to 90% according to the CME FedWatch tool. However, he does not agree with the move. He said higher rates are hurting rate-sensitive areas such as housing, credit cards and auto loans, while doing little to slow tech capital spending, which is not funded off the overnight rate.
Rieder also flagged risks from rising government debt globally, noting that the US budget deficit has grown to $2 trillion for fiscal 2026. He warned that higher rates add to borrowing costs for already-indebted governments, and that heavy AI bond supply is beginning to crowd out other borrowers as government yields rise.
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Japan's core inflation rose above the BOJ's 2% target for the first time in nine months, strengthening the case for a December rate hike as bitcoin trades…
Japan's underlying inflation hit 2.4% in September, shifting market focus from the timing of the next BoJ hike to the peak rate.
Japan's core inflation rate rose to 2.1% in September, breaching the Bank of Japan's 2% target for the first time since December and supporting the yen.
Japan's flash composite PMI held at 52.3 in October as services offset a factory slowdown; hiring cooled and cost pressures persisted.