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New 'bond king' makes predictions on yields, Fed
The surge in bond yields-which move inversely to bond prices, was rather puzzling-given "relatively muted" economic growth, said Greg Davis, global head of fixed income at Vanguard, which just took the largest bond-fund crown from Pimco.
Citing recent data points, Davis said Thursday, "One in 9 Americans are still underemployed. You don't see a ton of strength in the labor market."
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The retail sales data on Wednesday and the Producer Price Index on Thursday morning "still point to no signs of inflation picking up in the marketplace," he said on CNBC's " Squawk Box ."
Put all that together with predictions of about 2.5 percent economic growth for 2015, he sees the Federal Reserve maybe on hold until the end of the year for raising interest rates. "Our best estimate at this point is for them to start the rate hike cycle sometime in September or December."
"We expect [10-year Treasury yields] to stay anchored below 2.5 percent or so," he said, as investors seek the safety of bonds.
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The mild-mannered Davis shrugged off the moniker of "bond king," a term used for decades to describe legendary investor Bill Gross.
"We don't use that terminology 'bond king' in our shop," Davis said. "It's a team-based, collaborative approach."
The Vanguard Total Bond Market Index Fund, under the purview of Davis, recently claimed the title as the world's biggest bond mutual fund, with $117.3 billion in assets under management last month.
The former holder of the crown, the Pimco Total Return Fund, launched by Gross in 1987, slipped to No. 2, following two years of withdrawals.
Assets in the Pimco flagship fund slipped to $110.4 billion, after another $5.6 billion of outflows in April.
Gross suddenly left Pimco, the investment giant he co-founded in 1971, last September for smaller rival Janus Capital (JNS). Since then, Pimco has seen about $130 billion of net withdrawals from its open-ended funds.
The $1.5 billion Janus Global Unconstrained Bond Fund, managed by Gross, saw inflows of $100 million in the most recent quarter, Janus CEO Dick Weil told CNBC in an April interview. Last year, Gross put $700 million of his own money into the fund.
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