The Bank of America Merrill Lynch Global Broad Market Index’s 0.91 percent return last month pushed gains to 0.44 percent for the first 10 months of the year. Eight weeks ago, before Fed policy makers surprised investors by maintaining stimulus, the gauge was down 2.1 percent.
The rebound has alarmed BlackRock Inc.’s Laurence D. Fink, who said last week that the Fed’s decision is now contributing to “bubble-like markets.”
“It’s imperative that the Fed begins to taper,” Fink, who oversees $4.1 trillion in assets as chief executive officer of the world’s largest money manager, said Oct. 29 at a panel discussion in Chicago. “We’ve seen real bubble-like markets again.”
‘Sticking Power’
The four other firms that joined Deutsche Bank in correctly predicting at the start of 2013 that Treasury yields would rise, including Jefferies Group LLC and Credit Agricole SA, are all forecasting higher U.S. borrowing costs by year-end.
The jump in asset values may be one reason pushing the Fed toward tapering, David Zervos, the New York-based head of global fixed-income strategy at Jefferies, said in an Oct. 30 interview. By year-end, he expects 10-year yields will increase to 2.8 percent and reach 3.4 percent by June.
The economy will quickly regain its momentum as companies start to hire more workers, giving the Fed enough evidence to taper in January, according to David Keeble, the New York-based head of fixed-income strategy at Credit Agricole.
“Once you get into the taper talk, yields can spike mightily again,” Keeble, said in an Oct. 30 phone interview. Demand for Treasuries don’t have “much sticking power.”
He projects that 10-year yields will end the year at 2.85 percent and rise to 3.2 percent in June.
Yields on Treasuries climbed higher last week as the Institute for Supply Management’s factory index showed some parts of the economy already started to recover. Manufacturing grew in October at a faster pace than economists forecast, with the index climbing to the highest level since April 2011.