February 27, 2018 / 10:30 PM / 8 months ago

Fed in no rush to raise rates: BlackRock's Rieder

NEW YORK (Reuters) - The Federal Reserve is in no rush to hike rates, creating an opportunity for risk assets but posing a threat to long-term bonds, top BlackRock Inc portfolio manager Rick Rieder said on Tuesday.

Fed Chairman Jerome Powell on Tuesday vowed to prevent the economy overheating while sticking with a plan to gradually raise interest rates. Testifying before a congressional committee, he acknowledged the economy has strengthened, a remark that prompted investors to increase bets on four rate increases in 2018.

Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income, said in a note the Fed has done a “respectable job,” is not struggling to keep up with inflation and “doesn’t appear to be in a rush” to raise rates.

That is good news for risk assets and investments with short maturities despite the 1.3 percent decline of the S&P 500 index on Tuesday.

But long-dated bonds are a different story, according to Rieder. The risk of long-term bonds to rising interest rates grew as the Fed pursued its unconventional quantitative easing policies, he said. The benchmark 30-year Treasury bond fell 6/32 in price on Tuesday to yield 3.1629 percent.

“The long-end of the curve could well have further downside from here,” said Rieder. “This segment of the market is particularly price-sensitive today, and thus particularly perilous.”

BlackRock oversees more than $6 trillion in stocks, bonds and other assets, making it the world’s largest asset manager.

Reporting by Trevor Hunnicutt; Editing by Phil Berlowitz

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