10Y UST yields have generally traded in the 4.80-5.00% range over the past weeks but broke below the recent range following the November FOMC Meeting. Economists at Danske Bank expect long rates to decline, but less than previously.
Bond yields headed lower towards 2024
We still pencil in a downward trending profile for long UST yields over the coming year, though with a higher level expected on a 12M horizon compared to our September forecast.
We expect the 10Y UST yield to decline by 70 bps to 4.20% (previously 3.70%), as inflationary pressures soften and Fed initiates its cutting cycle. The upward revision is mainly an effect of a higher Term Premium, which we expect to prove stickier than the pricing of policy rates remaining ‘high forever’.