(Bloomberg) — DoubleLine Capital’s Jeff Sherman said he remains bearish on long-term Treasuries, arguing that heavy government borrowing and weakening demand will continue to pressure the market.
Treasuries rallied Thursday as haven demand returned amid concerns about the artificial-intelligence trade and turmoil in the French market. But the rebound from “oversold” levels hasn’t altered the fundamental pressures facing longer-dated debt, Sherman, deputy chief investment officer at DoubleLine, said on Bloomberg Television.
“We continue to be significantly underweight in most portfolios, if not short the back end of the curve, because ultimately the pressures will materialize,” Sherman said.
Rising yields in markets such as Japan have intensified global competition for capital, reducing overseas demand for Treasuries, he added.
Sherman also criticized Treasury Secretary Scott Bessent’s efforts to talk down yields. “He is using these very aggressive words, like ‘I am the house, I have information you don’t,’” Sherman said. “The market hasn’t responded well to that.”
“If you want investors to bite, give them much more confidence and don’t try to shame us,” Sherman said, referring to Bessent’s dismissal of some critics as “Terminal bros.”
Turning to the credit market, Sherman said that while still underweight the tech sector, he has started to “nibble” at some debt after the recent selloff. Meta Platforms Inc.’s credit risk hit a record high Thursday as plans for increased capital spending added to concerns over AI-related borrowing. Bonds of CoreWeave Inc. – an AI could-computing provider — tumbled last week as concerns mounted about its debt-funded expansion.
“We started to nibble in the hyperscalers and neoclouds a little bit,” Sherman said. “When you combine things — 12%, 13%, 15% yields — and you think that insulates you against bad outcomes, as a credit investor, that is what you are supposed to do.”
–With assistance from Victor Swezey.
(add comments on hyperscalers’ debt in seventh paragraph)
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