BofA Strategists Lower US Treasury Yield Outlook, Expect Fed to Revise Risk Assessment

According to a report by Jinse Finance, Bank of America’s interest rate strategists have lowered their forecasts for U.S. Treasury yields, as the bank expects recent economic data to prompt the Federal Reserve to reassess its risk outlook. The team of strategists led by Mark Cabana has revised their year-end forecast for the 2-year yield from the previous 3.75% down to 3.5%. They now expect the 10-year yield to be 4.25% by the end of December, compared to the earlier estimate of 4.5%. In a report released on Monday, Cabana wrote: “Recent U.S. data has significantly changed the market’s pricing of the interest rate outlook, as well as our own view on U.S. rates. The risk of diminished Fed independence could mean a greater tolerance for inflation and more support within the central bank for lower rates, all of which have been factored into our assessment.”