(Bloomberg) -- BlackRock’s Rick Rieder said that market expectations for the Federal Reserve to begin cutting interest rates in March are likely too early.

“Today’s re-trenchment makes some sense to me,” the firm’s chief investment officer of global fixed income said on Bloomberg TV’s ETF IQ program Monday, as Treasuries sold off across the yield curve. The market action reflects the fact that Fed Chair Jay Powell didn’t intend to be “that aggressive about starting to cut this quickly.”

Rieder said he was surprised by Powell’s dovish tone during Wednesday’s FOMC meeting. For example, he didn’t reference that the central bank was aggressively fighting inflation.

Treasury yields plunged after Powell’s speech, with the yield on 10-year US Treasuries falling below 4% for the first time since August, while traders went all-in on pricing interest-rate cuts next year.

Meanwhile, several Fed officials have struck a less dovish tone in the wake of Powell’s speech. On Friday, John Williams said it’s too soon to start thinking about lowering borrowing costs as officials consider whether policy is restrictive enough to get inflation back to 2%.

Against this backdrop, Rieder said he’s underweight the front end of the yield curve and favors the middle or “belly” of the curve when the Fed does begin to pivot. 

The big drop in longer-dated Treasury yields has been surprising and Reider said “demand on the back end of the curve has been one of the most curious things I have seen. Pension funds have done well with their equities and can now lock in these yields. Some of that is going on, but the sheer size of the demand has been truly eye-popping.”

A 30-year bond yield trading just above 4% “is not that attractive,” based on a historical basis and contains “duration risk” at a time when the front end has higher yields.

“What was most interesting about Powell is there was no pushback on financial conditions easing, which was a pretty stark contrast to where they were a few weeks ago, three weeks ago,” he added. 

--With assistance from Scarlet Fu and Eric Balchunas.

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