A Bank of America survey showed a record 87% of fund managers expect long-term higher Treasury yields, Reuters reports. Another 76% see a steeper yield curve. The higher yields reflect expectations that the Federal Reserve is unlikely to reconfigure its purchases to cap an increase in longer-dated yields at Wednesday’s meeting.
- Goldman Sachs expects yields on the 10-year Treasury to end next year at 1.3%, up from 0.911% on Tuesday.
- Analysts at Deutsche Bank forecast a rise of Treasury yields to 1.5% by late summer 2021, while Charles Schwab expects yields to trade in a range between 1% and 1.6%.
- The so-called steepener trades, bets that the long end of the Treasury yield curve will rise more quickly than the short end.
- Some investors believe a vaccine-fueled surge in economic growth could test the Fed’s framework next year by pushing yields higher.
- Only a fifth of 43 economists in a recent poll by Reuters expect the Fed to ramp up economic stimulus at its December meeting.
- “If the Fed says something that doesn’t square well with the market, the move is likely to higher yields than lower yields”- Bruno Braizinha, BofA strategist.
- Already, bearish bets on longer-dated Treasuries are near records in futures markets, while options investors have piled into positions that would profit if yields rose.
- COVID-19 vaccine expectations have bolstered the case for investors to sell safe-haven Treasuries in favor of riskier assets such as stocks, which have boosted Treasury yields.
U.S. 10-year Treasury yield is currently at 0.92%
