The 10-year Treasury yield may climb to 2.75 percent to 3 percent over the “medium term’’ as the Federal Reserve will probably raise rates twice more this year, according to Pacific Investment Management Co.

The likelihood of a reduction in the Fed’s balance sheet over the next couple of years will also bolster yields, said Mark Kiesel, Pimco’s chief investment officer for global credit. President Donald Trump’s proposed tax cuts means the market will have to build in higher inflation risk and term premium for more debt issuance in the future, he added.

“The trend towards modestly higher rates is intact,” Kiesel said in a Bloomberg Television interview with Betty Liu and Yvonne Man. “After the Fed raises one or two more times, the market has to price in the taper.”

The U.S. 10-year yield more than doubled from an all-time low in July to reach 2.64 percent in December, before retreating to 2.16 percent last month as confidence in the Trump reflation trade waned. It was around 2.39 percent Tuesday in New York.

The Fed kept rates on hold last week, making it clear it wasn’t discouraged by weak first quarter growth, which it described as “transitory,” and noting the labor market had strengthened while inflation was seen rising to the 2 percent target.

The overnight U.S. swap market is already pricing in a high likelihood that policy makers will hike at the next meeting in June, which would mark the third rate rise since December.

The economy will do “much better” in the second quarter as the weakness earlier in the year was due to temporary factors, Kiesel said. Inflation should also trend higher as Trump’s proposed tax cuts mean higher inflationary risk and term premium for more debt issuance in the future, he said.

Yields are vulnerable to declines if the fiscal stimulus is delayed, the Senate fails to put forth a health-care package that could get through Congress or North Korean tensions escalate, Kiesel said.

Pimco prefers investment-grade bonds to high-yield securities and has been selling energy debt, the manager said.

“It’s prudent to be more conservative today,” he said. “We still see some select value but overall we have been de-risking.”