by David Randall
NEW YORK (Reuters) – HSBC raised its year-end forecast for the 10-year U.S. Treasury yield from 3% to 3.5% as the Federal Reserve said the U.S. economy would continue to expand and more interest rate hikes were needed to fight inflation. Strategists at the bank wrote in a note on Thursday.
Analysts at the firm, led by Steven Major, said: “There is pressure for short-dated bond yields to rise amid recent Fed dovishness in support of GDP data.
The firm expects the 10-year Treasury yield to end at 3% in 2024.
The benchmark 10-year U.S. Treasury yield rose to a 16-year high of 4.49% on Thursday, while the interest rate-sensitive 2-year yield hit a 17-year high of 5.2%. Bond products move in the opposite price direction.
The US central bank left interest rates unchanged on Wednesday as markets expected. But policymakers have strengthened their bleak stance in 2024, with more rate hikes forecast for the end of the year and monetary policy forecasts more than markets had expected.
Despite the Fed’s dovish stance, there are reasons to believe global central banks are closer to cutting rates than markets now anticipate, Capital Economics strategists wrote in a note on Thursday. The organization expects 21 of the world’s 30 major central banks to cut interest rates next year.
Despite rumors of a “long-term high,” he wrote, “we believe a tightening cycle of global monetary policy is approaching.”
(Reporting by David Randall; Editing by Mark Porter)