Assets are not acting as one would expect if inflation has been well and truly vanquished.
From Bloomberg, October 21:
- Shifting supply, demand will push up long-term yields: firm
- Debt costs are rising, fueling concerns among bond investors
Benchmark Treasury yields may soon hit a key level on the back of rising inflation expectations and concerns over US fiscal spending, according to T. Rowe Price.
“The 10‑year Treasury yield will test the 5% threshold in the next six months, steepening the yield curve,” according to Arif Husain, chief investment officer of fixed-income, who helps oversee about $180 billion of assets at the firm. The fastest path to 5% “would be in the scenario that features shallow Fed rate cuts,” he wrote in a note.
The call stands out against market expectations of lower yields, after the Federal Reserve cut rates for the first time in four years last month. It also underscores the increasing debate in the world’s biggest bond market, following strong economic data that has raised questions about the likely pace of cuts.
Yields on 10-year Treasuries most recently traded at 5% last October, hitting their highest level since 2007 as fears of a prolonged period of high interest rates gripped markets. Turbulent repricing could be on the cards if Husain’s prediction proves accurate, with strategists currently expecting yields to fall to an average 3.67% in the second quarter....
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