T. Rowe Price’s Solomon Predicts Yield Surge, Shorts Long-Term Treasuries

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T. Rowe Price’s Solomon Predicts Yield Surge, Shorts Long-Term Treasuries
Credit: © Reuters.

Scott Solomon of T. Rowe Price has taken a bearish stance on long-term Treasuries this Thursday, predicting a surge in yields due to the Federal Reserve's rate hikes. This move marks a significant shift for Solomon, who was initially in favor of bonds due to signs of an impending recession. The InvestingPro data shows that T. Rowe Price has a market cap of $23.28B USD and a P/E ratio of 15.39, suggesting a fairly valued company in the current market.

Persistent inflation, driven by increasing energy and food prices, has influenced Solomon's outlook. The global bond fund he manages has reported an annual loss, as the benchmark 10-year yield and the Federal Reserve's key rate have reached their highest levels in a decade. According to InvestingPro, T. Rowe Price's revenue growth was -14.15% for the last twelve months (LTM), indicating a challenging economic environment.

In contrast to Solomon's position, both AllianceBernstein (NYSE: AB ) LP and JPMorgan are anticipating a buying scenario for US securities. They believe that as the Federal Reserve's cycle nears its end, it will create favorable conditions for such investments. An InvestingPro Tip suggests that T. Rowe Price yields high return on invested capital and operates with a high return on assets, which could be a positive factor for investors considering the company's stock.

This divergence in strategy underscores the complexities of navigating the current economic climate, with inflationary pressures and monetary policy decisions introducing significant uncertainty into the markets. T. Rowe Price's return on assets was 12.88% for the last twelve months, according to InvestingPro data, demonstrating the company's ability to generate earnings from its assets despite the economic challenges.

InvestingPro Tips also mention that T. Rowe Price has maintained dividend payments for 38 consecutive years, which may provide some stability for investors during these uncertain times. The company's dividend yield as of 2023 was 4.71%, according to InvestingPro data. For more insights like these, readers can check out the InvestingPro product that includes additional tips.

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