HALISTER1: RESEARCH ROUNDUP: UST Yield Forecasts Cut Further

RESEARCH ROUNDUP: UST Yield Forecasts Cut Further

(Bloomberg) -- (Updates Morgan Stanley in item published July 12.)
  • Most strategists’ end-2016 forecasts for UST 10Y yield now 1.25%-2% vs 2.25%-3% at start of year, when rising inflation expectations and heavy long-maturity credit issuance were expected to dominate
  • Forecasts underwent a round of cuts in Jan. and Feb. based on weak U.S. economic data, poor stock market performance and multi-year low oil prices
  • Latest forecast cuts followed drop to YTD lows, led by U.K. yields to record lows after unexpected vote in favor of exiting EU; UST 10Y and 30Y yields have since also fallen to record lows
  • 10Y yield began 2016 at about 2.25%; at that time, lowest forecasts were from HSBC (1.50%) Citi (2.30%) and Deutsche Bank (2.25%); among highest were from Goldman Sachs (3%) and Credit Suisse (2.95%)
  • Related story: For Wall Street Bond Strategists, There’s Wrong and Less Wrong
  • Barclays
    • 10Y yield forecast lowered to 1.55% on July 7 from 2%; original forecast range 2.1%-2.6%
  • BNP
    • 10Y yield forecast 1.60% since May 26; original forecast 2.75%; MORE
    • Recommended tactical long UST 10Y in April targeting 1.60%; revised target to 1.40% on June 16
  • BofAML
    • 10Y yield forecast cut to 1.50% on June 27; original forecast 2.65%
    • Predicted record low yields during 3Q followed by 4Q rebound; MORE
  • Citi
    • 10Y yield forecast cut to 1.60% on July 1 from 2.05%; original forecast 2.30%; MORE
  • Credit Suisse
    • 10Y yield forecast lowered to 1.40% on July 8 from 2%; original forecast 2.95%; MORE
  • Deutsche Bank
    • 10Y yield will trade around midpoint of 1.25% through 2H, strategists said June 24; original forecast 2.25%
  • Goldman Sachs
    • 10Y yield forecast 2% as of June 27; original forecast 3%; MORE
  • HSBC
    • 10Y yield forecast 1.50%; MORE
  • JPMorgan
    • 10Y yield forecast lowered to 1.55% on July 11 from 1.70%; original forecast 2.75%; MORE
  • Morgan Stanley
    • 10Y yield forecast lowered to 1.25% on July 17 from 1.75%; original forecast 2.70%
    • Forecast assumes that Fed stays on hold through 2017; real GDP growth of 1.6% this year, 1.4% next year; investors pricing in higher probabilities of a rate cut followed by QE in 2017; MORE
  • Nomura
    • 10Y yield forecast cut to 1.75% on July 1; original forecast 2.5%
  • Societe Generale
    • 10Y yield forecast lowered to 1.50% on June 30, with 1.25% likely in 3Q; MORE
  • TD
    • 10Y yield forecast cut to 1.40% on June 24 vs 2.50% original forecast; end-2017 forecast set at 1.90%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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