Treasury Yields Stay Above Forecasts as Strategists See Gradual Decline

The 10-year Treasury yield is expected to decline gradually over the next year, even after strategists misjudged its direction for nine consecutive months and the benchmark posted its largest quarterly increase since 1994.

Median forecasts from a survey conducted Oct. 5-7 put the yield at 5% by year-end, 4.90% in six months and 4.75% in one year.

Some strategists believe financial markets have priced in too many Federal Reserve rate increases, leaving the eventual tightening cycle smaller than expected.

Inflation concerns linked to the U.S.-Israeli war with Iran and higher policy rates at major global central banks have pushed government borrowing costs across several developed economies to multidecade highs.

Borrowing by technology companies to finance artificial intelligence infrastructure has added to upward pressure on yields, along with increased issuance of U.S. Treasury debt.

The outlook comes as Treasury yields above 5% add pressure to stocks, increasing the importance of future Federal Reserve policy decisions for bond markets and other risk assets.