BlackRock's Bearish Treasury Call Adds Interest Rate Risk to Growth Narrative

What happened

BlackRock's Investment Institute publicly turned bearish on long-term U.S. Treasuries, warning that AI-related financing could drive up U.S. borrowing costs and exacerbate government debt concerns. This move comes despite the firm's recent record performance, with AUM hitting $13.5 trillion in Q3 2025 and revenue up 25% year-over-year, supported by strong ETF inflows and growing technology subscriptions. As the world's largest asset manager, BlackRock's outlook could influence market sentiment and client allocations, particularly in fixed income segments where fee income is sensitive to interest rates. The bearish stance introduces a new risk factor that contrasts with the DeepValue report's emphasis on diversification and technology moat as buffers against market volatility. Investors must now assess how this macroeconomic view aligns with BlackRock's strategic focus on expanding private markets and embedded tech workflows.

Implication

This announcement may lead to strategic reductions in long-term Treasury product emphasis, potentially impacting net inflows and advisory fees in BlackRock's fixed income business, which accounts for a significant portion of its AUM-based revenue. While the firm's technology and ETF segments offer resilience, higher borrowing costs could compress overall fee margins and challenge the premium multiple justified by growth drivers like iShares scale and Aladdin subscriptions. Investors should watch for updates on how this outlook translates into actual portfolio adjustments and client reactions, as sustained outflows or fee compression in fixed income could weaken the BUY thesis. The development underscores the importance of BlackRock's diversification into private markets and subscription services, which may provide more stable income but face integration risks from recent acquisitions like GIP and HPS. Long-term, if the bearish call proves accurate, BlackRock's ability to pivot toward higher-yielding alternatives and maintain its technology edge will be critical to sustaining growth and defending its valuation.

Thesis delta

The BUY thesis centered on BlackRock's scale and technology moat now confronts a direct interest rate risk from its own bearish Treasury outlook, which could pressure fixed income revenues and fee yields. While core growth in ETFs and private markets remains robust, this shift necessitates a reassessment of near-term earnings sensitivity to higher borrowing costs, potentially tempering the premium multiple if not offset by continued subscription revenue growth.