Wall Street Strategists Divided on the Future of US Bond Yields
As US bond yields climb to their highest levels since 2002, Wall Street strategists hold differing views regarding year-end expectations.
The surge of US bond yields to levels not seen since 2002 has caused disagreements among Wall Street strategists concerning year-end forecasts. Energy price shocks and Fed policies are impacting the market.
Historical Levels in Bond Yields
The US 10-year Treasury yield rose to 5.36%, while the 30-year Treasury yield climbed above 5.7%, reaching levels not seen since 2002.
Shocks in energy prices due to the Iran war, the Fed's pivot toward interest rate hikes, and artificial intelligence-driven growth have clouded the outlook for the bond market.
Bank of America's Expectations
Bank of America forecasts that the Fed will raise interest rates at its October and December meetings.
The bank expects the 10-year Treasury yield to be at 5% by the end of the year, while emphasizing that short-term risks favor higher yields.
Barclays and Citigroup Forecasts
Stating that there is no clear reason for yields to decline as long as the economy remains strong, Barclays raised its 10-year bond forecast to 5.25%.
Citigroup maintained its forecast of a decline to 5% by year-end, while noting that a lack of buyers could keep yields high in the short term.
Deutsche Bank and Goldman Sachs Views
Deutsche Bank set its year-end 10-year yield forecast at 4.8%, while stating that higher levels remain possible due to current volatility.
Goldman Sachs shared one of the most optimistic forecasts, expecting the yield to drop to 4.75% as inflation pressures ease.
JPMorgan and Morgan Stanley Analyses
JPMorgan expects the 10-year Treasury yield to fall to 5.05%, while warning against the risk of short-term increases due to central bank tightening.
Morgan Stanley kept its year-end forecast at 4.8%, stating that the market is pricing in a hawkish stance regarding the Fed.