COPR

BlackRock’s shift adds weight to the case that higher yields are starting to compete with equities for capital, a dynamic that could cap stock valuations even as earnings stay strong. The key swing factor is oil: Middle East war and higher crude prices have driven the sharp repricing of Fed expectations, so any easing in the Iran war would support BlackRock’s view that rate-hike bets are overdone and favour its short-end Treasury call. Conversely, a further oil spike that lifts this week’s CPI and PPI could push yields higher still and test the cushion BlackRock estimates before Treasury returns turn negative. Demand from large allocators at these yields may also help steady the long end after recent volatility, while the trimmed JGB underweight suggests Japanese yields above 3% are drawing more interest.

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