US: we don’t expect any noteworthy increase in 10Y yields – Danske Bank

Analysts at Danske Bank, forecast the US 10-year government bond yield at 2.75 in 3M and at 2.90 in 6M.  

Key Quotes:  

“Given the spate of uncertainties and the weakening economy already witnessed in 2019, coupled with the latest ECB announcements, we no longer expect an ECB rate hike in December; nor do we expect any noteworthy increase in 10Y yields on a 12M horizon.In other words, we expect the benchmark Bund yield to be trading in a tight -0.1% to +0.25% range throughout 2019, with mainly risk appetite determining at which end of that range yields would be. For the next couple of months, we expect yields to trade at the lower end of this range. However, as some of the risks disappear and growth starts to improve, which is still our baseline scenario, yields could move to the high end of the range.

“The Fed has signalled it will be ‘patient’ about raising rates again until we have seen a rebound in the global economy and higher inflation.”

“However, we still expect two Fed hikes this year in June and December given our positive macro outlook. Risks are clearly for fewer or no rate hikes, though. In light of our Fed forecast, we also see some upside for long US yields. We expect the 2y10y curve to invert within 12 months.”