10-year Treasury yield has remained in a narrow range near its current level of 3.75%
There’s little reason for it to stay there, and many reasons to expect it to move considerably higher.
Fed also appear to be increasing their estimate of the “neutral” rate that neither restrains nor boosts the economy, suggesting that a higher fed funds rate will be required to combat any given level of inflation.
How high, then, might Treasury yields go? Let’s put together the pieces.
Suppose the Fed’s short-term interest-rate target, adjusted for inflation, averages about 1% over the next decade. Inflation averages 2.5%, and the bond risk premium is one percentage point.
In sum, this suggests a 10-year Treasury note yield of 4.5%. And that’s a conservative estimate
Bill Dudley Bloomberg 29 juni 2023
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