The 30-year Treasury yield continues to rise amid expectations of elevated inflation, tallying at 5.18%, its highest level since April 2007. A stronger-than-expected economy is also driving the rally, as growth lowers the need for rate cuts and supports higher rates for longer. Even higher yields could be on the way, according to Citigroup macro rates strategist Jim McCormick.
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Trade QQQ with leverageMcCormick believes that 5.5% is the new test for yields as inflation shows no signs of slowing down. “Investors’ calculus in terms of buying the dip on Treasuries has changed,” he said.
Yields Eye 6% as Oil-Driven Inflation Fuels Surge
Barclays echoed McCormick’s claim, while a Bank of America survey showed that 66% of fund managers expect the yield to breach 6% over the next year, a level not seen since June 2000.
Rising oil and gas prices stemming from the closure of the Strait of Hormuz have boosted yields as the U.S.-Iran war drags on. A resolution to the conflict could provide some relief for bondholders, as easing energy prices would likely reduce inflation pressures and pull yields lower.