US 10-year yields seen at 3% by year-end – TDS

In view of FX Strategists at TD Securities, US 10-year yields are expected to climb to the 3% area in by year-end.

Key Quotes

“GDP growth is tracking just 2% or so for Q1, but should improve to around 3% annualized per quarter for the rest of 2018. Base effects help raise core PCE inflation to 1.8% in March, but we still expect it below 2% all year. Thus risks for an additional Fed rate hike this year remain; for now we stick with three. Market volatility and more protectionism cast some uncertainty into the mix”.

“Treasury yields should continue grinding sideways to higher, reaching 3% by year-end. The market remains focused on the impact of real rates on risk assets, with a sharp decline in risk assets potentially limiting the rise in rates. We think current market pricing for 2018/2019 hikes is fair, and expect rising term premium to help steepen the curve from current levels”.