Jim Bianco: Why I’m Finally Buying Bonds After Six Years

The bond market has reached appropriate yield levels, ending a six-year period of overvaluation as rates align with a 5-6% nominal growth economy. Sticky inflation, driven by deglobalization and persistent supply chain disruptions, makes a return to the Federal Reserve’s 2% target unlikely. While AI-related debt like CoreWeave shows localized stress, this remains idiosyncratic rather than systemic. Jim Bianco, president of Bianco Research, argues that 5% interest rates represent a return to normalcy after a decade of abnormal zero-interest-rate policy. The Federal Reserve’s shift away from forward guidance under Kevin Warsh introduces market uncertainty, yet higher rates are necessary to prevent speculative excesses. Ultimately, the transformative potential of AI productivity gains poses a greater long-term economic risk than current credit volatility, as it threatens to bifurcate the economy between high-productivity sectors and those unable to adapt to higher financing costs.