Tags: bond | yields | economy | Treasury

Most Economists See Higher Bond Yields Ahead

By    |   Thursday, 24 April 2014 01:03 PM

U.S. economists are virtually unanimous in believing Treasury bond yields will be higher six months from now.

That is a major caution flag for financial markets, according to Peter Tenebarum, an economist and author of the Acting Man financial blog. He said a recent Bloomberg News survey of U.S. economists showed overwhelming support for the notion that Treasury yields are headed up.

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“This is a truly striking result, and given the well-known propensity of mainstream economists to guess wrong (their forecasts largely consist of extrapolating the most recent short-term trend), it may provide us with a few insights.”

Tenebarum noted that many investors went into 2014 expecting higher rates as well, and shunned the Treasury market in droves.

“Instead, the benchmark yield is lower than when the year started, as the market waded through subpar economic data, geopolitical tensions, and uncertainty over the Federal Reserve.”

The 10-year note traded at a yield of 2.72 percent on Tuesday, down from just over 3 percent on Dec. 31.

“Color us unsurprised regarding the fact that the 'most hated asset class' has turned out to be one of the better performing so far this year,” Tenebarum said. “If the economy doesn't do what seemingly everybody expects it to do in the famed 'second half' (practically the entire sell-side shares the consensus of the economists surveyed by Bloomberg), then Treasurys and gold should be expected to rise, while equities could end up getting hit quite badly.”

Economists are not the only financial professionals taking a dim view of Treasurys.

MarketWatch reported that Jim Bianco of Bianco Research pointed out a JPMorgan client survey showing the percentage of money manager respondents who said they are underweight Treasurys is at the second-highest level in seven years.

As for the broader outlook, a separate April survey of 72 economists by the National Association for Business Economics showed overwhelming support for the notion that the U.S. economy will grow this year.

The NABE said its respondents are forecasting the U.S. economy will grow at least 2 percent in the next 12 months.

Editor’s Note:
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U.S. economists are virtually unanimous in believing Treasury bond yields will be higher six months from now.
bond, yields, economy, Treasury
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2014-03-24
Thursday, 24 April 2014 01:03 PM
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