10-Year Treasury Notes surge in yields is probably just a detour, But...
... But that doesn’t mean it won’t hurt.
What everyone wants to know now is how much further the selloff will go and how long it will last. I can venture a few educated guesses based on history.
The 10-year yield tends to max out at — or slightly above — the Federal Reserve’s peak policy rate, which currently stands at a range of 5.25% to 5.5%
and is projected by the median Fed forecast to peak 25 basis points higher later this year.
This stands to reason because investors traditionally demand a premium for the inherent uncertainty associated with holding longer-term bonds.
June 2023, the median prognosticator thought that the 10-year yield would end 2023 at 3.53%.
And even today the consensus suggests that the yield will fall back to 4.06% by the end of the year.
It’s worth considering why everyone was so convinced a few months ago — and many still are today — that “this time is different.”
The jump in long-run yields could ultimately prove to be the downfall for markets and the economy, but I’m not ready to join the economic doomsday crowd.
Whether the Fed can win the battle without triggering an economic downturn is still an open question, but the latest developments in the bond market have guaranteed that we’ll find out sooner rather than later.
Jonathan Levin Bloomberg 9 oktober 2023
“If we don’t know where the top in rates will be, we don’t know where the bottom in the equity market is going to be.”
Wells Fargo’s Chris Harvey said
Kommentarer