Name: We're Big Buyers of the 10-Year at 5%, BMO's Davis Says
Uploaded: 2026-08-24T12:50:06+00:00
Duration: 356 s

Speakers

Earl Davis — Head of Fixed Income, BMO Global Asset Management

Summary

Earl Davis of BMO Global Asset Management discusses Treasury supply, global yield-curve steepening, and credit positioning. He would be a big buyer of 10-year Treasuries at 5% to 5.25% but would avoid 30-year Treasuries at 6% because of duration risk. He is trimming tight corporate credit risk, sold U.S. high yield, bought short-dated investment grade, and is watching financials, aerospace and defense, and energy for pullbacks.

Funding via the Treasury General Account is not significant for markets because it is ultimately T-bill funded.
The 10-year Treasury yield hitting 5% is seen as a major buying opportunity and potential policy trigger.
The 30-year Treasury is viewed as poor risk/reward at 6% due to roughly 20-year duration.
The long-end selloff is framed as a global yield-curve steepening trend led by Japan.
Credit valuations are tight, prompting a temporary de-risking of U.S. high yield and rotation into short-dated investment grade.
Canada high yield remains a relative long.
Financials, aerospace and defense, and energy are favored sectors for potential pullback buying.

Ideas

Earl Davis Head of Fixed Income, BMO Global Asset Management 0:54

Big buyer of 10-year at 5%.

He wants to buy 10-year Treasuries once yields reach 5% to 5.25%. He argues the move is not an economic or 10-year-specific story but a global long-end/30-year bond story. At that yield, 10-year notes carry far less mark-to-market duration risk than 30-year bonds, and 5% would likely trigger Fed or Treasury action or intervention.

Earl Davis Head of Fixed Income, BMO Global Asset Management 1:11

Global yield-curve steepening is hard to fight.

He sees the rise in long-end yields as a global yield-curve steepening phenomenon led by Japan, not a US-specific story. Japan's 2s30s curve is about 300 basis points steep versus roughly 110 basis points in the US, so US curves could steepen substantially and the trend is hard to fight.

Earl Davis Head of Fixed Income, BMO Global Asset Management 2:11

Avoid 30-year Treasuries due duration risk.

He would not touch 30-year Treasuries at 6% because with roughly 20-year duration, a 1% yield backup would produce about a 20% mark-to-market loss. Ten-year notes have only about 6.5 years of duration, so coupon income recovers a similar move within about a year.

Earl Davis Head of Fixed Income, BMO Global Asset Management 5:27

Sold U.S. high yield into tight spreads.

He is trimming corporate credit risk because valuations are tight and volatility should cause a temporary, not persistent, spread reset. The firm sold all its U.S. high-yield exposure and expects to buy high yield back after spreads widen.

Earl Davis Head of Fixed Income, BMO Global Asset Management 5:29

Still long Canadian high yield.

The firm remains long high yield in Canada even after selling all U.S. high yield, indicating a relative preference for Canadian high-yield credit.

Earl Davis Head of Fixed Income, BMO Global Asset Management 5:35

Bought short-dated investment-grade credit.

The firm bought all investment-grade credit in the two-to-three-year bucket because it can convert that exposure to cash and rotate into high yield when spreads widen. This is liquid dry powder rather than a permanent credit position.

Earl Davis Head of Fixed Income, BMO Global Asset Management 5:43

Buy financials, defense, energy on pullbacks.

He is watching financials, aerospace and defense, and energy for pullbacks. Financials are favored because steeper yield curves help banks borrow short and lend long, and he says the firm really likes energy as well.

This Bloomberg Markets video, published August 24, 2026, features Earl Davis discussing 10-Year U.S. Treasury, U.S. Yield Curve Steepener, 30-Year U.S. Treasury Bond, HYG, Canadian High Yield Corporate Bonds, IGIB, XLF, ITA, XLE. 7 trade ideas extracted by AI with direction and confidence scoring.

Speakers: Earl Davis · Tickers: 10-Year U.S. Treasury, U.S. Yield Curve Steepener, 30-Year U.S. Treasury Bond, HYG, Canadian High Yield Corporate Bonds, IGIB, XLF, ITA, XLE

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

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