We're Big Buyers of the 10-Year at 5%, BMO's Davis Says

• Treasury General Account funding for bond buybacks is not considered significant or impactful on markets.
• BMO expects 30-year Treasury yields to reach 6% before 10-year yields hit 5%.
• The firm is a 'big buyer' of 10-year Treasuries at 5-5.25% due to less mark-to-market risk compared to 30-year bonds.
• Steepening yield curves are a global phenomenon (led by Japan) that can be growth-productive for banks.
• BMO is trimming US high-yield credit, buying short-duration investment-grade (IG) bonds, and favors financials, aerospace & defense, and energy sectors.

Earl Davis of BMO Global Asset Management dismisses the significance of using the Treasury General Account for bond buybacks. He anticipates 30-year Treasury yields will hit 6% before 10-year yields reach 5%, and his firm is a 'big buyer' of 10-year bonds at the 5-5.25% level due to lower duration risk. He sees global steepening yield curves as growth-productive for banks and identifies opportunities in financials, aerospace & defense, and energy.