U.S. Treasury yields are expected to trade sharply lower a year from now than was forecast just a few weeks ago
U.S. Treasury yields will trade sharply lower a year from now than was forecast just a few weeks ago, according to fixed-income strategists polled by Reuters, who also expected the U.S. yield curve to steepen further.
But markets are pricing for a series of interest rate cuts starting just two months later, underscoring an exceptionally large divergence from the central bank’s own view. U.S. 2-year Treasury yields, currently trading at around 4.0%, were seen falling about 50 basis points to 3.45% over the next 12 months - a 40-odd basis-point downgrade from a survey conducted last month.
“The pricing for immediate cuts is likely too aggressive, but markets continue to react disproportionately to weaker data,” Misra said. Meanwhile a still-strong labor market and sticky inflation continue to tell a tale of a resilient economy, not a typical scenario for pricing in imminent rate cuts.
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