Danske Research Team
Danske Bank A/S
The US bond market has been setting the direction in global bond markets over the past two weeks. Since the beginning of September, 10Y US Treasury yields have jumped more than 30bp to currently 3.16%. The move higher in yields has been especially noteworthy given the poor performance for global equity markets in the same period.
On 14 October we published FI Research: Next stop is 3.50% for 10Y US treasury yields where we looked at the drivers for US yields in particular over the coming three to six months.
We argue that even after the recent move higher in US yields we still have upside potential and accordingly we have changed our forecast for 10Y US yields, which we now expect to hit 3.30% (3.05%), 3.50% (3.20%) and 3.50% (3.50%) on a 3, 6 and 12 month horizon (old forecasts in brackets).
We continue to see modest upward pressure on yields and rates in Europe in 2019. The first ECB rate hike is moving closer and the ECB QE programme is widely expected to have ended. The latter has created some concerns that we could see a jump in yields such as we saw in the US in 2013, when the Federal Reserve scaled back on bond purchases (tapering). We see this risk as relatively small.
Our new yield forecast for 10Y US treasury yields will also if correct, tend to push German and Scandinavian longer-dated yields higher. We have consequently revised our 12M forecast for German 10Y yields higher to 0.90% from 0.8% previously.
In Sweden our updated yield forecast now includes a second rate hike in July 2019 on top of the one we expect in December this year.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.
Recommended Content
Editors’ Picks
EUR/USD climbs to 10-day highs above 1.0700
EUR/USD gained traction and rose to its highest level in over a week above 1.0700 in the American session on Tuesday. The renewed US Dollar weakness following the disappointing PMI data helps the pair stretch higher.
GBP/USD extends recovery beyond 1.2400 on broad USD weakness
GBP/USD gathered bullish momentum and extended its daily rebound toward 1.2450 in the second half of the day. The US Dollar came under heavy selling pressure after weaker-than-forecast PMI data and fueled the pair's rally.
Gold rebounds to $2,320 as US yields turn south
Gold reversed its direction and rose to the $2,320 area, erasing a large portion of its daily losses in the process. The benchmark 10-year US Treasury bond yield stays in the red below 4.6% following the weak US PMI data and supports XAU/USD.
Here’s why Ondo price hit new ATH amid bearish market outlook Premium
Ondo price shows no signs of slowing down after setting up an all-time high (ATH) at $1.05 on March 31. This development is likely to be followed by a correction and ATH but not necessarily in that order.
Germany’s economic come back
Germany is the sick man of Europe no more. Thanks to its service sector, it now appears that it will exit recession, and the economic future could be bright. The PMI data for April surprised on the upside for Germany, led by the service sector.