Revising up slightly our 10-year Treasury yield forecast (2024)

FAQs

What is the 10 year Treasury forecast? ›

The 10-year yield could reach 5%, but the bar is high and it's not what SEB Research expects, he said. “For the 10-year Treasury yield to move higher from here, new triggers would be needed.” Some analysts say a rise to 5% would require rate increases to become a realistic prospect.

We are revising up our end-2024 and end-2025 forecasts for the 10-year Treasury yield by 25bp, to 4%. This reflects recent changes to our projections for the federal funds rate.

The 10-year note is undoubtedly a highly significant benchmark for global financial markets. A rising yield indicates investor confidence in the economy but also suggests higher borrowing costs, potentially slowing economic growth. Conversely, a falling yield may signal economic uncertainty.

The 10-year yield is used as a proxy for mortgage rates and is also seen as a sign of investor sentiment about the economy. A rising yield indicates falling demand for Treasury bonds, which means investors prefer higher-risk, higher-reward investments, while falling yield suggests the opposite.

If bond yields rise, existing bonds lose value. The change in bond values only relates to a bond's price on the open market, meaning if the bond is sold before maturity, the seller will obtain a higher or lower price for the bond compared to its face value, depending on current interest rates.

In CBO's projections, that rate begins to decline in the second quarter of calendar year 2024. Interest rates on 10-year Treasury notes rise in 2024 and then fall through 2026. Inflation (as measured by the price index for personal consumption expenditures) slowed markedly in 2023.

30-year mortgage rates are currently expected to fall to somewhere between 6.1% and 6.4% in 2024. Instead of waiting for rates to drop, homebuyers should consider buying now and refinancing later to avoid increased competition next year.

The 10-year Treasury yield serves as a vital economic benchmark, and it influences many other interest rates. When the 10-year yield goes up, so do mortgage rates and other borrowing rates.

Why is 10 year Treasury yield going down? ›

The increase in inflation to 5.0% in May from 4.2% in April has pushed the real (inflation-adjusted) yield on 10-year Treasury bonds even lower, to negative 3.5%. The goal of the monetary policy is to facilitate investments by pressuring interest rates lower.

Most of the recent jump in Treasury yields is due to a so-called term premium, said Andrew Hunter, deputy chief U.S. economist at Capital Economics. Basically, investors are demanding a higher return to lend their money to the U.S. government — in this case, for 10 years.

Many factors like inflation expectations, economic growth and monetary policy are in play in determining yields for 10-year Treasuries. As interest rates have risen and the inflation rate declined from its 2022 peak of over 9%, the real interest rate has once again entered positive territory.

This time has been different: The 10-year Treasury yield has been hovering in a range above where it was when the Fed last hiked in July 2023. We believe the historical relationship should hold and we expect the 10-year Treasury ultimately to decline modestly from current levels as growth and inflation slow.

Although the 10-year Treasury yield has briefly reached 5%, we expect it will end the year at 4.6% and decline to around 3% in 2025. We predict it will remain at approximately 3% over the next 10 years, well above the 1.9% average between 2009 and 2019 but low enough to drive recovery in real estate values.

Watchlist. The 10-year U.S. Treasury yield rose last week, but we expect yields to decline slightly over the course of the year. Spread assets underperformed Treasuries. Increased seasonal supply should provide an attractive entry point for municipal bonds.

MBA: Rates Will Decline to 6.1% In its March Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.1% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the first quarter of 2025.

The United States 30 Years Government Bond Yield is expected to be 4.67% by the end of September 2024. Video Player is loading.