Survey: Experts see 10-year Treasury yield falling over the next year
Market experts surveyed by Bankrate expect Treasury yields to fall slightly over the next 12 months following a historic rise in interest rates driven by the Federal Reserve’s efforts to slow the economy and bring down inflation. Bankrate’s Second-Quarter Market Mavens survey found that market analysts expect the 10-year Treasury yield to decline to 3.58 percent a year from now, down from 3.74 percent at the end of the survey period on June 9, 2023.
Most of the survey’s respondents expect rates to be lower a year from now, with forecasts ranging from 3.2 percent to 4.0 percent.
“There’s no question that despite the strong doses of interest rate medicine administered since March 2022, the economy has proven more resilient,” says Mark Hamrick, Bankrate’s senior economic analyst. “That could translate to a solid base for market fundamentals for the months ahead.”
Forecasts and analysis:
This article is one in a series discussing the results of Bankrate’s Market Mavens second-quarter survey:
- Survey: Experts see 10-year Treasury yield falling over the next year
- Survey: Experts predict stocks will rise less than 4% over coming year
- Survey: Here’s how to invest amid a surging stock market, rising interest rates and an aggressive Fed
Investment pros see 10-year yield declining slightly over the next 12 months
The 10-year Treasury yield has spent nearly all of the past 20 years below 5 percent, reaching record lows during the COVID-19 pandemic as the Fed cut rates to support the economy. At its bottom, the 10-year yield hit about 0.50 percent in August 2020, but began to rise as the economy recovered. Rates rose steadily throughout 2022, as the Fed aggressively hiked rates to combat inflation, and the 10-year yield soared to 4.25 percent in October 2022.
Investment professionals surveyed by Bankrate expect the 10-year yield to be 3.58 percent at the end of the second quarter of 2024, down slightly from the 3.7 percent level they expected it to reach at the end of March 2023, as indicated in the previous survey.
The survey period ended a few days before the Fed paused its interest rate hikes, though it signaled that it expects to raise rates twice more this year. Fed Chair Jerome Powell said “it may make sense for rates to move higher, but at a more moderate pace.”
The survey’s estimates have roughly tracked the overall rise in interest rates, with forecasts increasing from 2.19 percent in the fourth quarter 2021 survey to 3.7 percent in the first quarter 2023 survey.
Rise in interest rates presents an opportunity for bond investors
With interest rates rising significantly over the past three years, some market experts think now is a good time to buy bonds. Bond prices fall as interest rates rise, and vice versa, so additional interest rate hikes could pressure bond prices. But with yields around 4 percent and some short-term rates even higher, bonds may present an attractive opportunity.
“We would take advantage of these higher yields to increase duration and lock them in,” says Sameer Samana, senior global market strategist at Wells Fargo Investment Institute. “We also favor the short part of the curve.”
CFRA Research Chief Investment Strategist Sam Stovall sees an opportunity to profit from bond investments, particularly if rates have peaked.
“Fixed income assets will likely appreciate in the year ahead as well, since interest rates are projected to decline,” Stovall said.
Brian Nick, former chief investment strategist at Nuveen, sees an opportunity for investors to boost their bond exposure and shift away from more risky investments.
“Fixed income looks attractive compared to equities in the U.S.,” Nick said. “Long-term investors should be holding a robust mix of stocks and bonds, especially if they’ve drifted into a higher risk category in recent years.”
Methodology
Bankrate’s second-quarter 2023 survey of stock market professionals was conducted from June 1-9 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Dec Mullarkey, managing director, SLC Management; Patrick J. O’Hare, chief market analyst, Briefing.com; Marilyn Cohen, CEO, Envision Capital; Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Hugh Johnson, chief economist, Hugh Johnson Economics; Sam Stovall, chief investment strategist, CFRA Research; Kenneth Chavis IV, CFP, senior wealth counselor, Versant Capital Management; Brian Nick, former chief investment strategist, Nuveen; Brad McMillan, chief investment officer, Commonwealth Financial Network; Chuck Carlson, CFA, CEO, Horizon Investment Services; Michael Farr, CEO, Farr, Miller & Washington; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
