Oct 18, 2026 · 1h 16m
Bianco finds value in 5% bonds as inflation reshapes markets
Jim Bianco: Why I’m Finally Buying Bonds After Six Years
The case for buying bonds now depends on whether persistent inflation, fiscal pressure, and changing growth expectations have made higher yields durable.
- 1Bianco sees roughly 5% bond yields as historically normal and attractive after years of unusually low or negative rates.
- 2Deglobalization, tariffs, and higher oil-shipping costs could keep goods inflation elevated and complicate Federal Reserve policy.
- 3AI may drive substantial productivity and nominal growth, but its financing boom can still create concentrated credit and valuation risks.
Don't miss
Bianco says he would not buy CoreWeave’s 2032 unsecured bonds despite their 15% yield, distinguishing AI’s promise from concentrated credit risk.
The brief
After six years of bearishness, Jim Bianco turns constructive on bonds, arguing that yields near 5% offer a better risk-reward balance even with inflation still sticky.
Bianco links renewed inflation pressure to deglobalization, tariffs, and costly oil shipping, while explaining why producer prices may lead consumer inflation only after an uncertain lag.
The Federal Reserve still matters to long-term yields: an incorrectly set short-term rate can force the bond market to demand an excessive risk premium.
Bianco treats positive rates as historically normal and says U.S. yields reflect growth, inflation, and fiscal conditions—not sovereign credit quality alone.
On AI, he sees an underappreciated productivity breakthrough but rejects CoreWeave’s 2032 unsecured bonds at a 15% yield, separating transformative potential from issuer risk.
The episode’s central tension is whether AI borrowing will be repaid by stronger growth or expose a concentrated credit problem before the promised productivity arrives.
What was said on this episode
42 statements · 29 positive · 11 negative · 1 mixed · 1 neutral
Bianco became constructive on bonds after six years of bearishness.
“I became very constructive on the bond market for the first time, as you pointed out, in six years.”
Listen at 1:50
Bonds are no longer expensive at current yields.
“Bonds are no longer expensive”
Listen at 3:21
Bianco recommends owning longer-maturity bonds to capture higher yields.
“I'll step up and own longer durations, meaning longer maturity bonds with higher yields because I want to capture those yields.”
Listen at 3:27
Bianco judged bonds’ risk-reward ratio favorable at current yields.
“I thought it was a good risk reward ratio finally for bonds. And that's why I stepped up and belong.”
Listen at 3:45
Bianco expects bonds will avoid similarly negative returns going forward.
“I don't think you're going to see that kind of a negative return in bonds.”
Listen at 4:52
A negative ten-year bond return would require 14–15% yields within five to seven years.
“It would take 14% to 15% 10-year yields in the next five to seven years.”
Listen at 5:03
Bianco considers future bond-market losses very unlikely.
“it's very unlikely that you're going to see any kind of losses in the bond market going forward.”
Listen at 5:27
Bianco says bond yields now provide approximately 5% income.
“there is a yield in the bond market, 5%.”
Listen at 6:06
Bianco judges a sharp rise in inflation to 4–7% unlikely.
“the risk that it runs to 4, 5, 6, 7 or something like that is low.”
Listen at 6:17
Bianco rejects a recession outlook for the U.S. economy.
“I'm not in the recession camp at all.”
Listen at 7:09
Bianco expects goods deflation will not return.
“My point is we're not going back to goods deflation.”
Listen at 12:51
Bianco says overall inflation cannot fall below roughly 3%.
“we cannot disinflate back under, say, 3% on overall inflation.”
Listen at 12:57
Bianco expects inflation to remain around 3%.
“I'm arguing we're stuck at three.”
Listen at 23:22
Bianco expects nominal economic growth to remain between 5% and 6%.
“nominal growth is probably going to stay in the 5% to 6% range”
Listen at 23:33
Bianco recommends that the Federal Reserve eliminate forward guidance.
“I'm in favor of getting rid of forward guidance.”
Listen at 27:28
Bianco warns that market-led correction can push interest rates excessively high.
“it will take interest rates to confiscatorily high levels.”
Listen at 29:37
Bianco predicts negative-rate conditions will not recur for 5,000 years.
“I don't think we're going to see it again for 5,000 years.”
Listen at 32:12
Bianco evaluates 5% interest rates as historically normal and beneficial.
“5% interest rates are normal. This is a good thing that we have interest rates back to 5%.”
Listen at 32:33
Bianco expects U.S. sovereign yields to remain relatively high.
“The U.S. has sticky inflation, has strong growth and a big budget deficit. It's going to get one of the higher levels of yields.”
Listen at 35:45
Bianco predicts the United States will not default on its debt.
“The U.S. is never going to default.”
Listen at 38:15
Bianco reiterates that the United States will not default.
“the u.s is never going to default”
Listen at 38:18
Bianco says U.S. interest rates should exceed those of most countries.
“Given all of that, it makes sense we should be higher than most other countries.”
Listen at 39:16
Bianco expects Fed uncertainty to increase the market risk premium.
“there is going to be a higher risk premium in the market”
Listen at 41:00
Bianco recommends interest rates near nominal economic growth.
“If you've got a 5% growing economy, You want 5% interest rates.”
Listen at 44:08
Bianco judges approximately 5% rates normal and zero rates abnormal.
“So yeah, I think rates should be. around five. That's normal. Zero was the abnormal.”
Listen at 45:01
Bianco recommends that the Federal Reserve continue raising rates.
“I think they should.”
Listen at 48:43
Bianco estimates fair value for the federal funds rate at approximately 4.5%.
“I think the fair value of the funds rate is four and a half ish percent.”
Listen at 48:44
Bianco says three additional rate hikes are needed to reach fair value.
“that means we need three more rate hikes in order to just get back to fair value.”
Listen at 48:47
Bianco assesses the corporate credit market as not broadly overleveraged.
“So in general, the corporate credit market is not over levered.”
Listen at 52:01
Bianco rejects a broad credit-market collapse originating in hyperscaler debt.
“I don't see it as being a broader issue that, you know, first the hyperscalers can't borrow and then the credit market goes bust.”
Listen at 55:56
Bianco assesses AI as potentially as revolutionary as railroads.
“I think it is as revolutionary as the railroads, anything we've seen in the last hundred years.”
Listen at 57:04
Bianco predicts AI will substantially transform the modern economy.
“AI is going to just revamp the modern economy.”
Listen at 59:00
Bianco predicts AI will increase productivity by orders of magnitude.
“the productivity output will be orders of magnitude larger than what you're currently doing right now.”
Listen at 59:48
Bianco predicts AI will eventually culminate in an investment bubble.
“every technology ends in a bubble this one will be no different”
Listen at 1:00:56
Bianco assesses that AI has not yet reached peak bubble conditions.
“Right now, we don't have that.”
Listen at 1:01:31
Bianco predicts AI-related markets will rise substantially before eventually declining.
“It's going to go up a lot more than people think before eventually we get that bust and the downside.”
Listen at 1:03:16
Bianco would not buy CoreWeave bonds at a 15% yield.
“No, I would probably not be a buyer of core reef.”
Listen at 1:04:31
Bianco expects AI-related convertible bonds to rise.
“I do think that that space will go up.”
Listen at 1:05:14
Bianco predicts successful AI adoption would increase GDP and nominal growth.
“That means the GDP is going to go up. That means that nominal growth is going to go higher.”
Listen at 1:07:43
Bianco says successful AI adoption could raise appropriate rates from 5% to 6%.
“maybe the five handle on interest rates might be six.”
Listen at 1:07:48
Bianco considers AI-driven productivity capable of producing much faster growth.
“What if we can do that because of productivity enhancements of AI?”
Listen at 1:09:35
Bianco is more concerned that AI will succeed and generate massive productivity gains.
“I'm more worried about that. It's going to work and we're going to get massive productivity enhancements.”
Listen at 1:14:53
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
Books & mentions
Some links are affiliate links — PodLume may earn a commission if you buy.
Weekly email
State of the Pod, every Monday
The week's most-discussed names and stories from podcasts, with the moments behind them. Free, five minutes, unsubscribe in one click.