Andersen Capital Management CEO Peter Andersen said he is not worried about the 10-year Treasury yield above 5%, arguing rates alone do not dictate stock values. Companies with strong cash flow, he said, can better handle higher costs than heavily indebted firms.
Looking further back than 2007, Andersen said 5–6% 10-year Treasury yields were fairly normal; he argued ultra-low rates from the global financial crisis through COVID had shifted expectations and said the economy was performing strongly. He said that, all else equal, if cash flows rise at the same pace as interest rates, the higher discount rate can have no effect on a stock’s present value.
Andersen said high-yield bonds are particularly sensitive to rates, as are overleveraged, junk-rated companies that are already barely able to make interest payments. He said rate changes have much less effect on many other companies.
