Revising up slightly our 10-year Treasury yield forecast (2024)

FAQs

What is the projection for the 10 year Treasury yield? ›

We are revising up our end-2024 and end-2025 forecasts for the 10-year Treasury yield by 25bp, to 4%. This reflects recent changes to our projections for the federal funds rate.

The 10-year note is undoubtedly a highly significant benchmark for global financial markets. A rising yield indicates investor confidence in the economy but also suggests higher borrowing costs, potentially slowing economic growth. Conversely, a falling yield may signal economic uncertainty.

NEW YORK, April 3 (Reuters) - Rising Treasury yields could provide the latest test for a rally that has made U.S. stocks increasingly expensive while taking them to fresh record highs. Expectations that the Federal Reserve will cut interest rates this year helped the S&P 500 (.

Investors are piling into the market to capture the higher yield and they're likely to continue to do that." A combination of strong economic data and limited progress on inflation in the last couple of months has amplified calls among Fed officials for patience as they approach a decision on when to cut rates.

The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.

In line with the outlook from other investment providers, the firm is forecasting a 5.7% gain in 2024 for U.S. investment-grade bonds, versus 4.9% last year and 2.3% in 2022. (All figures are nominal.)

Should I only buy bonds when interest rates are high? There are advantages to purchasing bonds after interest rates have risen. Along with generating a larger income stream, such bonds may be subject to less interest rate risk, as there may be a reduced chance of rates moving significantly higher from current levels.

Unless you are set on holding your bonds until maturity despite the upcoming availability of more lucrative options, a looming interest rate hike should be a clear sell signal.

Why Is the 10-Year Treasury Yield Important? The 10-year Treasury yield serves as a vital economic benchmark, and it influences many other interest rates. When the 10-year yield goes up, so do mortgage rates and other borrowing rates.

This time has been different: The 10-year Treasury yield has been hovering in a range above where it was when the Fed last hiked in July 2023. We believe the historical relationship should hold and we expect the 10-year Treasury ultimately to decline modestly from current levels as growth and inflation slow.

Will bond funds recover in 2024? ›

As for fixed income, we expect a strong bounce-back year to play out over the course of 2024. When bond yields are high, the income earned is often enough to offset most price fluctuations. In fact, for the 10-year Treasury to deliver a negative return in 2024, the yield would have to rise to 5.3 percent.

Longer-term Treasury bond yields move in the direction of short-term rates, but the spread between them tends to shrink as rates rise because longer-term bonds are more sensitive to expectations of a future slowing in growth and inflation brought about by the higher short-term rates.

When rates go up, bond prices typically go down, and when interest rates decline, bond prices typically rise. This is a fundamental principle of bond investing, which leaves investors exposed to interest rate risk—the risk that an investment's value will fluctuate due to changes in interest rates.

Basic Info. 10-2 Year Treasury Yield Spread is at -0.35%, compared to -0.33% the previous market day and -0.48% last year. This is lower than the long term average of 0.87%. The 10-2 Treasury Yield Spread is the difference between the 10 year treasury rate and the 2 year treasury rate.

Yields on Treasurys, which rise when bond prices fall, largely reflect what investors think the Fed's benchmark short-term rate will average over the life of a bond. They in turn set a floor on mortgage rates and other types of fixed-rate debt.

After topping out at 4.98% in October 2023, 10-year Treasury yields dropped below 4%, but trended higher over the course of 2024, with modest up-and-down-movements.

Mr Phoon expects yields on six-month T-bills to stay at around 3.65 per cent to 3.85 per cent, while one-year T-bills will be around 3.5 per cent. Mr Wong from Bondsupermart is sticking to his forecast for the yields of six-month T-bills to range between 3.7 per cent and 3.9 per cent in 2024.

Median Forecasts for 3-Month Treasury Bill Rate is at 4.75%, compared to 5.01% last quarter and 5.40% last year. This is higher than the long term average of 3.82%.

Starting yields, potential rate cuts and a return to contrasting performance for stocks and bonds could mean an attractive environment for fixed income in 2024.