July 27, 2021

(Reuters) – Most investors are sticking with bearish bets they placed earlier this year on U.S. Treasury bond markets, expecting 10-year yields to rise back towards 2% by year-end.

Yields are currently around 1.3% so if forecasts are right, a 60-70 basis point rise is in the offing over the coming months.

Here is a selection of views on the Treasury market outlook:


1/ Andrew Mulliner, Head of Global Aggregate, Janus Henderson:

“We think yields will be between 1.45 and 2%. We haven’t changed this and won’t off the back of the latest rally, which to us is more technical in nature than any fundamental reassessment of growth.”

2/Max Stainton, global macro strategist, Fidelity International:

“The market is over-reacting to the spread of the Delta variant (of COVID-19). Vaccines are still highly efficacious against the variant, and this is playing out in the data, where we are seeing the link between case counts and hospitalisations/deaths being severed in countries with high rates of vaccination.

“We expect yields to rise from here as the market unwinds its overly bearish stance, and can see yields near 1.8% by year end.”

3/Kiran Ganesh, head of multi asset, UBS Wealth Management:

“We are sticking with reflation trades and we are looking for yields to rise sharply to 2% by year-end as the market gets more comfortable with the Delta variant.”

4/Guneet Dhingra, head of U.S. interest rates strategy, Morgan Stanley:

Wednesday’s Federal Reserve meeting, robust August jobs data and a potential approval for a U.S. infrastructure spending package are all catalysts to lift yields in the near future.

Morgan Stanley expects a 10-year yield of 1.8% by year-end.

5/Antoine Bouvet, senior rates strategist, ING:

“It is true that data has stopped improving but this is hardly a justification for rates being where they are.

“Current levels are consistent with a much dimmer recovery or perhaps a recession, which in turn would justify a much more limited central bank tightening.

ING expects a 10-year yield of 2% by year-end.

6/Jan von Gerich, chief analyst, Nordea:

“We were targeting 0% by year-end for the Bund yield and 2% for the U.S. 10-year Treasury. Now those levels look quite far away but the ballpark is still around those, with downside risks.”

7/ Gerard Fitzpatrick, head of fixed income portfolio management, Russell Investments:

“Our central expectation is between 1.50% and 2%.”

“We do see (yields) gradually rising more up, probably not with the same velocity of movement that we’d seen with that real inflation fear. I think that one has been taken off the table to a large degree. Obviously, the uncertainty is if big inflation numbers started to print back again and the Fed did not manage that effectively.”

8/ Craig Inches, head of rates and cash, Royal London Asset Management:

“If you have faith that vaccines are effective … this is just an adjustment phase that the economies need to get used to.

“The market has basically used the last three months to price out some of that euphoria from the initial vaccine bounce. I actually think we will get the same sort of bounce again once the market adapts to living with COVID. So, my view would be that you’d actually see 10-year yields back around that 1.70%-1.80% level by year-end.

“We’ve been using this rally in bond markets to sell more duration.”


9/Larry Dyer, head of U.S. rates strategy, HSBC:

“The consensus forecast is consistent with a hawkish view of the Fed’s dot plot.

“Our work points to a lower longer-run dot than the consensus uses. Meanwhile, economic surprises favour lower, not higher rates, as we have seen in the past few months. We are comfortable with our lower for longer rate outlook and think that 10-year yields should be less than their 2% average for the past decade if the Fed is to get higher inflation.”

HSBC expects a year-end 10-year yield of 1%.

10/Peter McCallum, rates strategist, Mizuho:

“The risk-off in equities hasn’t actually been that dramatic as to cause this kind of move.”

“We still see fair value around 1.50% in 10-year Treasuries, with end-Q3-Q4 targets at 1.54%-1.64%.”

11/Lyn Graham-Taylor, rates strategist, Rabobank:

“If anything, the pandemic has accelerated a lot of things in terms of asset price inflation — wages going nowhere, a division in society between young and old, the older people in society win because they’re more likely to vote and a reduction in worker bargaining power.”

Rabobank expects a 10-year yield around 1.3% by year-end.

12/ Sebastien Galy, senior macro strategist, Nordea Asset Management:

“We expect the U.S. Treasuries to oscillate around current level for a few weeks and as talk of tapering intensifies from August to especially December, the front end and the back end to move higher, with the (10-year yields) reaching 1.50%.”


13/ Mike Riddell, head of macro unconstrained, Allianz Global Investors:

“Investor positioning is now close to neutral in government bonds, global growth indicators remain strong, and inflation is proving slightly stickier than we expected.  

“We therefore expect developed market sovereign bond yields to generally trend higher from here, and we have been cutting back some of our longer-dated government bond positions as a result.” 

14/ Annalisa Piazza, fixed income research analyst, MFS Investment Management:

“The market suddenly seems to be pricing in a lower neutral policy rate. I don’t really buy this story.

“Thinking that the Fed is not going to hike rates even to pre-pandemic levels, when they were at 1.25%, is an exaggeration.”

(Reporting by Yoruk Bahceli, Dhara Ranasinghe and Sujata Rao; Editing by Catherine Evans)