Longer-term U.S. Treasuries could be vulnerable if the Federal Reserve's outlook on interest rate cuts is challenged by stubborn inflation, a portfolio manager at asset management giant BlackRock said on Thursday. A majority of Fed officials this week confirmed earlier forecasts for the central bank to deliver three interest rate cuts this year despite stronger-than-expected growth, though only by a thread.
Should inflation remain persistently strong, however, prices for intermediate and longer term bonds could suffer because they do not fully reflect a scenario in which the Fed is forced to keep rates higher for longer, David Rogal, portfolio manager of BlackRock's Fundamental Fixed Income Group, said in an interview. "With all the heavy supply and a pretty robust economy, we don't have any term premium in the curve," Rogal said, referring to the premium investors ask for the risk of holding long-term paper. "For extending duration out that far on the curve, there should be more compensation." Rogal also noted that while Fed officials still expect three rate cuts this year, they projected a slightly slowed rate cut path for the next two years. Benchmark 10-year yields, which move inversely to prices, declined by nearly three basis points to 4.27% after the Fed's rate-setting meeting ended on Wednesda
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