Although upward pressure on the 10-year Treasury yield has abated a bit, the big picture is that it has risen by ~80bp on net in the past four months. While some of this rise has reflected a reassessment in the market of how quickly the Fed will cut rates next year, this isn’t the whole story. Investors have also ratcheted up their projections for where the rate will settle further out in time. For our part, we still expect the 10-year Treasury yield to drop back significantly by the end of next year, as the Fed eases by more than investors are discounting – even though we tend to agree that the rate will settle at a higher level than we had once envisaged.
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