After U.S. Treasury 10-year yields fell through the 1% mark last week, investors are questioning what the potential for benchmark maturity might be.
On the one hand, a handful of market participants fear that an aggressive fiscal agenda from incoming management Joe Biden could push the bond market as a result of disorganized sales there. the size of the 2013 taper tantrum, but others argue long-term Treasurys are unlikely to see a sharp rise as the Federal Reserve is unlikely to change the pace and scale of asset purchases this year.
Despite the speculation about a final destination for the production of government bonds, the consensus is that they will eventually rise as the economy recovers from the coronavirus pandemic with the help of the promotion of historically significant fiscal and monetary policy.
“Yields are going to be higher but not significantly higher,” Rob Daly, a founding director of revenue at Glenmede Investment Management, said in an interview.
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The 10-year note TMUBMUSD10Y,
rose as high as 1.187% on Monday, about 26 basis points higher than where it started at the end of last year, but has since retreated to 1.09% after a series of auctions Treasury success earlier in the week.
However, with this rapid climb within two weeks, Wall Street banks are blown away to raise their bond yield targets by the end of 2021.
A Wall Street Journal quarterly survey shows that economists on average maintained a year-end forecast of 1.44% for the 10-year Treasury.
Similarly, traders are now marking 1.5% as a line in the sand that may have previously crossed bond yields to see their rise.
There are two more levels to look at before markets reach that level, says Tom Di Galoma of Seaport Global Securities. It identified 1.2% and 1.35% as key resistance levels for the 10-year note.
But many were optimistic that the benchmark bond could surpass that top, as domestic and overseas investors have expressed a desire for Treasurys at current yield, considering the purchase of weekly auctions to default. US fiscal funding, with output in other developed countries still close to zero. or negative.
Fed senior officials have also stated that they would maintain an appropriate monetary policy in the future. Fed vice-chairman Richard Clarida said the central bank would not raise interest rates until inflation remained at 2% for a year.
HSBC strategist Lawrence Dyer said Wednesday it would be wise to take advantage of the recent bond market sale, as Treasurys had exerted too much financial pressure compared to Fed policymakers ’expectations.
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