BlackRock chief investment officer of global fixed income Rick Rieder is reducing stock exposure because high-grade bonds yielding 7% to 8% compare favorably with the 10% to 12% equity returns he expects. Rieder, who oversees about $2.4 trillion, spoke as the 10-year Treasury yield exceeded 5% for the first time since 2007, recently closing at 5.11% and reaching 5.167% on Sept. 26, while the 30-year yield stood at 5.49%. The Committee for a Responsible Federal Budget warned that Treasury rates around 5% could exceed medium-term nominal economic growth near 4%, creating debt-spiral risks including higher unemployment, falling asset values and surging inflation. Treasury Secretary Scott Bessent said the United States could grow out of the problem at 3% annual growth, while saying, “We don't have a revenue problem. We have a spending problem.” Rieder called the market an eye-opener rather than a crisis, graded stocks B-minus and continued favoring chipmakers and memory-storage companies because of order backlogs. He said higher inflation-adjusted rates and slowing AI growth are weighing on other equities, although economists also identified extensive AI investment as supporting growth and competing with federal borrowing for capital. Rieder’s income fund yields 7.2%, has an A-minus credit rating and focuses on bonds maturing or resetting within three years. He has sold some mortgage bonds as mortgage rates reached 7.45% and described housing as frozen. Although he believes the Federal Reserve should not raise rates, he expects one more increase and warned that each 100-basis-point move could add $130 billion to $150 billion to U.S. government costs. Rieder said bonds have historically returned about 9.5% over the following year when the 10-year yield starts at 5%, but he is not advising investors to rush in amid strong growth, war and heavy government borrowing.