A 10-year Treasury yield at or above 2% has been elusive. Here are the banks making it their 2022 call.
By Vivien Lou Chen
Major financial firms, such as JPMorgan Chase & Co. and
But expectations for central-bank policy also matter and "the U.S. Federal Reserve has provided the most tangible and imminent indication of liftoff," or the first rate increase, "to this point," according to portfolio managers Erin Browne and Geraldine Sundstrom of Pacific Investment Management Co., or PIMCO. The firm, which managed $2.2 trillion as of September, expects "government bond yields to trend higher over the cycle as central banks raise rates."Still, they said in an outlook released Tuesday, "the risk of a policy mistake has increased as monetary and fiscal stimulus recedes and authorities attempt to engineer a growth handoff to the private sector." That's creating the potential for more divergent outcomes -- such as sooner-than-expected tightening by central banks that ultimately hampers growth, or a "virtuous cycle" of greater consumption supported by higher personal savings which "would likely be a boon for economic growth."On Wednesday, most Treasury yields moved higher as investors digested news suggesting the omicron variant of coronavirus that causes COVID-19 may not impact the economy as much as feared. Rates on 10- and 30-year Treasurys rose, though the 2-year rate slipped, after a report from Pfizer Inc. (PFE) and
JPMorgan is heralding 2022 as the year of "a full global recovery, an end of the global pandemic, and a return to normal conditions we had prior to theCOVID-19 outbreak," according to Marko Kolanovic, chief global markets strategist, and Hussein Malik, who is global co-head of research along with Kolanovic.
"In our view, this is warranted by achieving broad population immunity and with thehelp of human ingenuity, such as new therapeutics expected to be broadly available in 2022," they wrote in a report released Wednesday.
They said they expect Treasury yields to rise in 2022, with the 2-year rate hitting 0.7% in the second quarter before getting to 1.20% by the end of next year. "Meanwhile, we believe the curve has room to steepen for a short period in early 2022, and we project 10-year yields will rise to 2% by mid-year and 2.25% by the end of 2022."
-Vivien Lou Chen
(END) Dow Jones Newswires
December 08, 2021 13:02 ET (18:02 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.