Strategist with 40 years on the Street: Bonds will only compete with stocks on returns if yields double

  • Treasury-bond yields need to be at 5 percent before they can compete with stocks on returns, strategist Mark Grant says.
  • Grant also says the market is seeing a correction but cautioned investors from overreacting.

Treasury-bond yields need to be at 5 percent before they can compete with stocks on returns, strategist Mark Grant told CNBC on Wednesday.

Grant appeared on "Squawk Box" alongside Kevin O'Leary of "Shark Tank" a day after government debt yields slipped as U.S. stocks saw a volatile trading session.

O'Leary asked the chief strategist at B. Riley FBR what percentage the yield would need to substitute equities.

"You would need about 5 percent before something like that would make sense," Grant replied.

As of early Wednesday, the yields on the benchmark 10-year Treasury note and the 30-year Treasury bond were at about 2.7 percent and 3 percent, respectively, as investors kept a close eye on massive swings seen in international and domestic markets.

"They would have to drop in value by 50 percent before you would buy them," O'Leary contended. Bond prices move inversely to yields.

"Under what scenario would that happen?" O'Leary asked Grant.

Grant responded with, "There's a lot of big money managers ... that have mandates to buy bonds, plus the big pension funds" could impact yields.

He also spoke on the stock market's massive swings this week.

The Dow traded in a more than 1,000-point range Tuesday and ended with a 567-point gain. It marked the first time in history that the Dow was both up 500 and down 500 points in the same session.

Grant said the market is seeing a correction but cautioned investors from overreacting.

"I've been doing this for 43 years," Grant said. "The world is not melting down. ... Some days it's ugly, but you have to put ugly in perspective."

Disclosure: CNBC owns the exclusive off-network cable rights to "Shark Tank."

Correction: Mark Grant is chief strategist at B. Riley FBR. An earlier version misstated the name of the firm.

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