• We expect long-term US yields to continue to tick up over the next 3-6 months as the US recovery gains speed and markets really begin to discuss the timing of Fed QE tapering. We now expect two rates hikes in H2 2022 after the more hawkish message from the Federal Reserve this week. 
  • However, yields will probably range trade with a slight upside risk over summer, as markets remain uncertain of whether the increase in inflation is transitory. The latest Fed message also adds upside
  • We continue to expect 10Y US Treasury yields to hit 2.0% on a 6M horizon and 2.2% 12 months from now.
  • While reopening has also come to the eurozone, the ECB chose to maintain the exceptionally high pace of QE buying through Q3 21. As such, we expect 10Y Bund yields to edge up a modest 10bp to -0.15% over the next three months and to rise a further 45bp to 0.3% on a 12M horizon. Higher long yields are likely to materialise mainly late in our forecast period - in 2022.
  • While we do not expect the ECB, the BoE or the Swedish Riksbank to change policy rates over the next two years, the Norwegian central bank, Norges Bank, looks set to hike in September and December 2021. The Danish central bank, Danmarks Nationalbank, will likely deliver a unilateral Danish rate cut of 10bp, taking key policy rates to -0.6%, within the next few months.

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