Although we did not expect Treasuries to come under fire after US equities turned a corner in March, we have revised down our previous end-2020, 2021 and 2022 forecasts for the 10-year yield to 0.5%, from 1.0%. This acknowledges both the downward trend in the yield since early June towards its March low of 0.5% amid worries about a resurgence of coronavirus, and signs from the Fed that it may soon strengthen its forward guidance to suggest that it will not raise interest rates until inflation rises consistently above 2%. In such circumstances, we think that real yields of TIPS will fall even further below zero, to the benefit of “risky” assets.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services