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Treasury Yield Surge Has Silver Lining: Pimco's McCulley

Wednesday, 27 May 2009 | 6:01 PM ET

We saw the Treasury market sell-off accelerate Wednesday, because the duration of the interest rate sensitivity of the mortgage market has been lengthening, said Paul McCulley, portfolio manager and managing director at Pimco.

Treasury prices fell on Wednesday, raising 10-year yields to six-month highs. Yields on 10-year notes jumped 14 basis points to 3.69 percent, the highest since mid-November.

“It was a pretty nasty affair today, but if there is a silver lining, the equity market paid attention,” McCulley told CNBC. “The equity markets are a little soft now; then, I think the robust viewpoint about the economy will fade a bit and we’ll stop out this backup in Treasury yields.”

Second Opinion:

McCulley said he does not worry about interest rates, but fears the largeness of the deficit.

“Interest rates are at incredibly low levels right now and once we get a recovery that’s worthy of the name interest rates, we’ll move up,” he said.

Disclosure:

No immediate information was available for Paul McCulley or his firm.

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