Yield Forecast Update: Higher Yields An H2 17 Theme

Published 02/13/2017, 08:34 AM
Updated 05/14/2017, 06:45 AM

While we continue to see further upside for both 10Y Bund and 10Y US Treasury yields on a 6M-12M horizon, we expect no major yield changes over the next three-six months.

Yields have fallen somewhat over the past month. We do not expect any further major downward correction in yields in coming months.

We expect the market to start pricing an ECB tapering premium in H2 17 and to start discounting an increased Fed hiking pace in 2018 as Donald Trump steps up fiscal policy stimuli.

We continue to expect a steeper 2Y-10Y EUR yield curve in 2017. While the ECB still has a tight grip on the short end of the curve, this is not the case for the 10Y segment. We expect 10Y Bund yields to rise to 0.90% and 10Y US Treasury yields to 3.0% by end-2017.

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