A Reuters poll of 75 bond strategists found that while most think Treasury yields are headed higher, the increases are expected to be relatively modest, despite the big jump in supply as the U.S. Treasury sells record amounts of debt.
Yields on the 10-year Treasury are expected to rise 40 to 50 fifty basis points in 2018, or about half a percentage point, up to 3.20 percent by the end of the year. Yields on two-year notes are expected to rise to 2.80 percent, an increase of about 60 basis points. The forecast is “less than might otherwise be suggested by an impending series of Fed interest rate hikes to manage a strong economy that is near full employment,” Reuters said.
Yields on the 10-year Treasury note fell this week, as worries about a possible trade war and tech stock valuations overwhelmed concerns about a glut of debt. Ajay Rajadhyaksha of Barclays told Reuters that, “Concerns about heavier Treasury issuance and an over-heating economy made for a powerful combination and raised fears of much higher bond yields, which in turn started the global equity correction in early February. We believe these fears are overblown.”