A new poll by the Reuters News Agency has found that bond traders and strategists expect U.S. Treasury yields to remain around their current levels in the year’s first half.
Bond strategists expect Treasury yields to fall in the second half of 2024 as the U.S. Federal Reserve cuts interest rates.
Since peaking at 5.02% in October 2023, the benchmark U.S. 10-year Treasury yield declined more than 120 basis points to finish 2023 just below 4%, the same level it was at to start last year.
The yield on the 10-year Treasury bond has ticked up to begin 2024 and is currently right at 4%. Bond yields move inversely to prices.
The latest data has shown that the U.S. economy is still growing and has dampened expectations for immediate interest rate cuts from the American central bank.
Futures traders are now pricing in a 67% chance of the first rate cut happening in March of this year, down from 90% two weeks ago.
A Jan. 5-10 poll of 62 bond strategists by Reuters found that a majority expect the yield on the 10-year bond to rise about 10 basis points to 4.10% over the next three months.
The yield on the 10-year note is then expected to fall to 3.93% by the end of June and to 3.75% by the end of 2024, according to the poll.
The interest rate sensitive two-year Treasury yield, currently around 4.35%, is expected to hold steady in the coming three months before falling to 3.50% by year’s end.
If expectations prove accurate, the negative spread between the two-year and 10-year Treasury, which can forecast a recession, will completely lose its inversion and have a 25-basis point spread between them by the end of 2024.
