The 10-year Treasury yield has climbed to 5.3%, above the 5% level the analyst had identified as a likely target. The forecast now is for a local peak by early November, with yields potentially turning lower around mid-November, though another move higher remains possible.
Why it matters
The analyst compares the current yield move with 2018 and 2022 midterm-year patterns, when 10-year yields topped in October or November before easing. The comparison is not exact: inflation was a larger concern in 2022, while the current rise is also tied to changing expectations for Fed policy.
Markets had assigned a 64% probability to an October rate hike a week earlier, according to the transcript, but that probability had fallen to 17.7%. The analyst argues that uncertainty over whether the Fed will raise rates has helped push long-term yields higher, as bond investors question whether policy is tight enough.
Market impact
The next Fed meeting, scheduled for October 28 in the transcript, is presented as a possible focal point for peak concern. A stronger inflation report could revive pressure on yields if investors believe the Fed is reluctant to hike; the analyst also points to softer PCE and labor-market readings as reasons the Fed might hold back.
The near-term call is that yields may top around late October or early November and begin falling around mid-November, potentially relieving pressure on risk assets. The analyst allows for a further rise to 5.4%, 5.5% or 5.6%, and says the timing is uncertain. The longer-term view is different: long-term rates could move higher over the next 10 to 20 years.
Frequently asked questions
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What level has the 10-year Treasury yield reached?
The yield has reached 5.3%, above the 5% level the analyst had previously identified as a likely target.
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When does the analyst expect yields could peak?
The forecast is for a possible local peak by early November, though the analyst says the top could come earlier or yields could rise further.
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How did expectations for an October Fed rate hike change?
The transcript says the market's probability of an October hike fell from 64% a week earlier to 17.7%.
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Why could the next Fed meeting matter for Treasury yields?
The meeting, scheduled for October 28 in the transcript, could be a focal point for concern about whether the Fed will raise rates as bond investors expect.
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How could falling yields affect risk assets?
If yields turn lower around mid-November as forecast, that could ease pressure on risk assets. The timing and direction remain uncertain.
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