2023-09-21 17:23:04
The Federal Reserve’s forecast that the U.S. economy will continue to expand and require further interest rate hikes to combat inflation has prompted HSBC to raise its year-end forecast for U.S. Treasury yields to 10 years at 3.5% versus 3%, the bank’s strategists wrote in a Thursday note.
“At a time when the Fed remains optimistic with support from recent GDP data, there is pressure for short-term bond yields to remain high, affecting the entire curve,” the analysts wrote of the firm, led by Steven Major, the global head of fixed income.
The company expects 10-year Treasury bond yields to reach 3% by the end of 2024.
Benchmark 10-year U.S. Treasury yields rose to 4.49% on Thursday, their highest level in 16 years, while interest rate-sensitive 2-year yields rose to 5.2%, their highest. high level for 17 years. Bond yields move inversely to prices.
The American central bank left its interest rates unchanged on Wednesday, as the markets expected. However, policymakers reinforced their optimistic stance by forecasting another rate hike by the end of the year and keeping monetary policy forecasts through 2024 significantly lower than markets had expected. anticipated.
Despite the Fed’s optimism, there is reason to believe that global central banks are closer to cutting rates than markets currently expect, Capital Economics strategists wrote in a note published Thursday. The firm expects 21 of the world’s 30 major central banks to cut interest rates by next year.
“Despite all the talk regarding rising interest rates, we believe the cycle of global monetary policy tightening is coming to an end,” the firm wrote.
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