According to Jim Bianco, the President of Bianco Research LLC, said he would choose two-year treasury notes over the Nasdaq Composite index, given the attractive yield and uncertainty surrounding the economy. The next rate hike will be determined by what would be the fallout of the banking crisis, according to Bianco.
What happened: The two-year has had its worst year, and it still surpasses the Nasdaq over the last 18 months. Bianco told CNBC that now that the two-year is giving me over a four percent yield, I would probably pick that going forward from here because I am not sure if the economy is going to turn around if we are facing a credit crunch.
Wall Street indices were at least 1% higher on Wednesday. The SPDR S&P 500ETF Trust SPY was 1.45% higher, while the QQQ Trust Series 1 QQQ gained 1.82%.
On Lending, Bianco believes lenders would not be willing to shell out loans actively, and that could put brakes on the economy.
Is there going to be a credit contraction because banks can't trust their deposit base? I am in the camp that the deposit base is unsure for the banks. Bianco stated that the Fed won't hike rates in such a situation because they're not going to be willing to hand out loans and that's going to lead to a broader and faster slowdown in the economy.
The market expert said that if he's wrong and the economy becomes overstimulated, the central bank would have to hike rates aggressively.
They are going to go back to where they were in the beginning of March and be looking for 6% or more. We have had extreme volatility in the bond market, so you can expect extreme volatility. Bianco said that the most of the risk is the risk markets like credit and like stocks and that they are going to be really struggling in this environment even though they haven't been for the last few weeks.
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