HSBC has revised its forecast for the yield on U.S. 10-year Treasury bonds by the end of 2025, increasing it from the previous estimate of 3% to 3.5%. This adjustment reflects potential changes in monetary policy in response to new U.S. government policies.
Steven Major, the global head of fixed income research at HSBC, noted that if the Federal Reserve were to raise rates in 2025, the long-term equilibrium rate could reach 4%. This would be more than 100 basis points higher than the Fed's guidance for the end of 2026 and beyond.
The bank is also considering the risks associated with a significant rise in short-term yields. It views the reversal of the summer's market rally as somewhat excessive, leading to a short-term bullish outlook on U.S. Treasury bonds due to their relative value compared to other global regions.
