"T. Rowe Price Warns Treasury Yields Could Hit 6%"

I believe this article originally came out yesterday at Bloomberg, ahead of the Federal Reserve move and Fedhead Powell's comments. It is basically our view but explained less obtusely than the introduction to December 12's "Grant's Interest Rate Observer's Jim Grant: «Interest Rates Are not Sticking to the Central Banks’ Script»":

Our best guess on the precious metals is a flushing-out of the speculative buyers who entered these markets over the last year or two, effectively transferring title to the asset before a run higher.

The likeliest way for this to be accomplished would be some combination of positive real interest rates and stagflation reasserting gold's and real rates' inverse relationship which had disconnected starting in 2022. Unfortunately just because something is likely there is no assurance that it will happen, though this seems to be the way to bet in the intermediate term. 

From The Global Treasurer, December 18 (a day after it was originally published but expanded):

The prospect of 10-year U.S. Treasury yields reaching 6% has resurfaced for the first time in over two decades, according to Arif Husain, Chief Investment Officer for Fixed Income at T. Rowe Price. Husain’s forecast, shared in a recent report, highlights persistent U.S. fiscal challenges and inflationary pressures that may be exacerbated by the potential return of Trump-era policies.

Husain projects that the benchmark yield could first climb to 5% in the first quarter of 2025 before potentially pushing further to 6%, a level not seen since 2000. “Is a 6% 10‑year Treasury yield possible? Why not? But we can consider that when we move through 5%,” Husain wrote, pointing to the opportunity for investors to position themselves during what he calls a political “transition period.”

Fiscal Deficits and Inflationary Risks

The basis for Husain’s prediction lies in two critical economic factors: persistent U.S. budget deficits and anticipated inflationary pressures from a second Trump administration. Key policy measures such as tax cuts, trade tariffs, and immigration restrictions could push prices higher and strain Washington’s fiscal outlook.

“The transition period in U.S. politics is an opportunity to position for increasing longer‑term Treasury yields and a steeper yield curve,” Husain noted, reflecting an increasingly bearish stance toward Treasuries in the near to medium term.

The outlook arrives as the broader Treasury market grapples with signs of weakening global demand. Japan, the largest foreign holder of U.S. sovereign debt, sold a record $61.9 billion of Treasuries in the third quarter of 2024. Similarly, China, another major investor, reduced its holdings by $51.3 billion, marking the second-largest quarterly sell-off in its history. Husain also highlighted the growing volatility of Treasuries relative to other government bonds, stating that this trend may be driving some investors toward alternative assets.

A Bearish View Compared to Peers

Husain’s outlook stands out as one of the most bearish among leading fixed-income strategists. ING Groep NV anticipates the 10-year yield could test levels between 5% and 5.5%, while Franklin Templeton and JPMorgan Asset Management see 5% as a reasonable ceiling in 2025.

Husain, however, believes the U.S. economy’s resilience makes a recession unlikely, further reducing Treasuries’ appeal as a safe-haven asset. “It appears that the Fed has successfully guided the economy into an elusive soft landing,” he said.

Treasuries at the Centre of Market Focus

The 10-year Treasury yield, a critical benchmark influencing borrowing costs across the economy, has hovered around 4.40% in recent days after reaching a peak of 4.74% earlier this year. Traders will closely watch the Federal Reserve’s policy statement this week as the central bank is widely expected to deliver a quarter-point interest rate cut. Investors will look for further guidance on the Fed’s easing trajectory and its stance on inflation....

....MUCH MORE

If interested see also October 21's ""Treasury 10-Year Yields May Hit 5% in Six Months, T. Rowe Says"
Assets are not acting as one would expect if inflation has been well and truly vanquished.

Meanwhile at Reuters via Kitco, December 18:

Gold hits one-month low after Fed signals slower easing pace in 2025

The rate on the 10-year Treasury note is up 0.1090 to 4.4940%.

As noted in October 28's "10-year Treasury yields rise above 4.3% ahead of inflation and jobs data":

Equity investors are going to want to see the ascent of rates halt very soon lest all the discounted present value calculations start to imply the cash flows they see ten years out aren't worth nearly as much as they were at the beginning of October....

The US dollar index is up 1.29 to a multi-year high at 108.24.

Today the DJIA was down 1123 points (-2.58%) the S&P 500 was down 178.45 (-2.95%) the Nasdaq was down 716.37 (-3.56%) and gold was off $62.40 (2.34%) at $2599.60.