As Yields Retreat, HSBC Sees 10-Year Treasury at 4.65%, Not 6%, by Year-End

The 10-year Treasury yield fell to 4.951% on Monday, retreating further from last week’s 19-year high of 5.041%. HSBC now sees the yield closer to 4.65%, not 6% by year-end, arguing the retreat has room to run.

Falling oil prices and hope for a deal with Iran calmed markets Monday. That marks a sharp reversal from the hawkish mood that drove last week’s spike. HSBC’s Treasury Yield Forecast Turns More Hawkish HSBC actually lifted its entire Treasury curve forecast this month.

It raised its two-year year-end forecast to 4.20% from 3.85%, and its 10-year target to 4.65% from 4.30%. The bank still expects the Federal Reserve to hold rates through 2027 as its base case. Yields have fallen below the psychological mark of 5%.

Image Source: CNBC However, HSBC now sees near-even odds of a hike this cycle. It called the Federal Open Market Committee’s (FOMC) internal debate “on a fine edge.” The bank credited Fed Chair Kevin Warsh’s Jackson Hole remarks with easing summer’s term premium.