Global bond rout looks ‘tremendously dangerous’ for stocks, hedge fund manager warns

An intensifying bond rout is piling pressure on the global economy and creating a “tremendously dangerous” outlook for equities, the chief investment officer of Livermore Partners hedge fund said Friday.

A new era of higher interest rates has caused bond yields to surge, hampering returns for investors and flipping on its head the status quo of the past decade-and-a-half, David Neuhauser told CNBC. Bond yields move inversely to prices.

Asked how worrying that landscape was for equities, he said: “I think it’s tremendously dangerous at this point.”

“We’re in this world of risk where, for almost 15 years, you had a bond market that was in a bull market, and you had rates negative for several years,” Neuhauser told “Squawk Box Europe.”

“That dynamic fed throughout the global economy, where housing prices were affordable, autos were affordable, and people were subjected to an environment and a lifestyle which had much lower interest rates.”
That environment has shifted as central banks have pushed ahead with rate hikes to tackle higher inflation. That, in turn, has pushed bond yields higher and sapped money from government budgets by raising borrowing costs.

In the U.S. Treasury market — a crucial component of the global financial system — bond yields have surged to highs not seen since the onset of the global financial crisis. In Germany, Europe’s largest economy, yields have hit their highest level since the 2011 euro zone debt crisis. And in Japan, where interest rates are still below 0%, yields have risen to 2013 highs.

“I think that is going to cause a lot of pain moving forward in terms of the economy,” Neuhauser said.