DoubleLine Capital: Large-scale debt issuance and weak demand will continue to exert pressure; remains bearish on long-term U.S. Treasuries.

Jeffrey Sherman, deputy chief investment officer at DoubleLine Capital, said he remains bearish on long-term U.S. Treasuries, believing that large-scale government borrowing and weak demand will continue to put pressure on the Treasury market. Although Treasuries rose on Thursday as renewed safe-haven demand was driven by market concerns over AI trades and turmoil in the French market, Sherman said the rebound from "oversold" levels has not changed the fundamental pressures facing longer-dated bonds. "We remain significantly underweight Treasuries in most portfolios, and some portfolios are even short the long end of the yield curve," he said. He added that rising bond yields in markets such as Japan have intensified the global competition for capital, thereby reducing overseas investors' demand for U.S. Treasuries. Sherman also criticized U.S. Treasury Secretary Bessent's approach of trying to push down Treasury yields. "He used these very aggressive phrases, like 'I'm the house, I have information you don't know.' The market did not react well to that," he said. "If you want investors to buy in, you should give them more confidence, not try to humiliate us." On the credit market, Sherman said that although he remains underweight the technology sector, he has begun "nibbling" at some debt after the recent market selloff. The credit risk of Meta Platforms (META.US) rose to an all-time high on Thursday, as plans to increase capital expenditure further intensified market concerns about AI-related borrowing. Bonds of AI cloud computing provider CoreWeave (CRWV.US) fell sharply last week amid growing concerns over its debt-financed expansion. "We're starting to nibble in hyperscalers and neoclouds," Sherman said. "When you combine the factors 12%, 13%, 15% yields and you believe those yields can protect you from a bad outcome, then as a credit investor, that's exactly what you should be doing."