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By Trevor Hunnicutt
NEW YORK, June 13 (Reuters) - BlackRock Inc’s chief investment officer of global fixed income, Rick Rieder, on Wednesday said he can foresee greater price deterioration in bonds and other investments affected by longer-term interest rates.
Despite effective communication by the Federal Reserve, which raised benchmark U.S. rates as expected on Wednesday, Rieder said in a note that there are now “more questions than answers regarding the near-term future” of monetary policy, which is likely to create more volatility.
The Fed’s “moderately hawkish policy statement provided a couple interesting twists,” according to Rieder, including how the Fed would react to continued declines in unemployment without further inflation, slowing economic growth in 2019, and tightening financial conditions.
“Now there are more questions than answers regarding the near-term future of policy,” he said.
“That means more volatility going forward for markets that key off of future interest rates,” meaning most markets, according to Rieder. But he said “longer-term interest rate products” were likely to see greater price deterioration.
The market’s initial reaction to the Fed’s statement was forgiving to long bonds, with price declines of just 0.08 percent in the 30-year Treasury benchmark, compared with 0.17 percent for 10-year notes.
BlackRock is the world’s largest asset manager, overseeing more than $6.3 trillion in stocks, bonds and other investments.
Low-fee shares of Rieder’s BlackRock Strategic Income Opportunities Fund are down 0.2 percent this year through Tuesday, roughly in the middle of the pack when compared to peers, according to Thomson Reuters Lipper research unit.
In that fund, Rieder has been trimming exposure to long-dated bonds. The fund’s holding of debts that expire in seven or more years is down from more than 50 percent at the end of 2017 to 23 percent at the end of May, according to disclosures on BlackRock’s website. (Reporting by Trevor Hunnicutt Editing by James Dalgleish)