Tags: Crofton | yield | Treasury | rate

Philadelphia Trust's Crofton: 10-Year Treasury Yield Will Hit 5-6 Percent

Friday, 02 Aug 2013 08:26 AM

By Dan Weil

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Interest rates are headed for a long ride higher, and the 10-year Treasury yield will reach 5 to 6 percent within 18 to 24 months, says Mike Crofton, CEO of Philadelphia Trust Co.

The 10-year yield hit an almost-two-year high of 2.75 percent July 8 and stood at 2.71 percent late Thursday.

"It is our opinion that interest rates have begun their ascent, that the Fed will eventually lose control of interest rates," Crofton tells CNBC. "The yield curve will first steepen and then will shift, moving rates significantly higher."

Editor’s Note:
Obama Donor Banned This Message (Shocking)

Just as the bond market rallied for 30 years, it's now poised for 30 years of hard times, he predicts.

So far, most of the money coming out of bonds is going into cash, Crofton notes. But, "if the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly," he adds.

"The Fed will not be able to control it."

Bond selling will feed on itself as retail investors join the party when they see the value of their bond portfolios dropping, Crofton says. "More and more bonds will be sold and rates will continue to go up."

Some investors have turned bearish toward Treasurys amid expectations the Federal Reserve will begin to taper its quantitative easing soon.

"The [economic] data has been very impressive, and it's pointing toward growth that will likely allow the Fed to start reducing its asset purchases," Ira Jersey, an interest-rate strategist at Credit Suisse, tells Bloomberg.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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