December 21, 2009
Data according to today’s Wall St. Journal survey of various Treasury primary dealers:
§ Forecast for 2-year yield to rise to 1.825% by the end of 2010; current = 0.799%
§ Forecast for 10-year note will yield 4.125%; current = 3.548%.
§ In June 2007, before the credit crunch, the 10-year yield traded above 5.3%.
§ However, the forecast 10-year note’s yield is near past 5-year average (4.1%)
§ YTD, Treasury’s have lost 2%
§ High-yield, high-risk corporate bonds are 2009’s best performing fixed income asset with a return of 57% YTD
Why will bond yields rise?
§ Better economic outlook
§ Fed expected to raise federal funds rate since holding them near zero since December 2008.
§ Large debt issuance by the Treasury, which is forecast to raise $1.4 trillion in the current fiscal year that started in October after selling $1.786 trillion in fiscal 2009