Treasuries have mostly priced in the slowing of Federal Reserve asset purchases and 10-year yields will end the year near 3 percent, according to AllianceBernstein Holding LP (AB:US), which oversees $475 billion.
The Fed is forecast to slow monthly buying to $75 billion from the current $85 billion pace at its Sept. 17-18 meeting, according to the median estimate in a Bloomberg News survey. The 10-year yield increased 48 basis points since June 30 to 2.97 percent today after touching a two-year high of 3.01 percent on Sept. 6.
“A U.S. 10-year around 3 percent, which is kind of where we are right now and close to nominal growth in the States, we think that’s probably where we should be,” said Alison Martier, a senior money manager at AllianceBernstein, at a briefing in Sydney. “In no way, shape or form do we think we’re in a rapidly-rising interest-rate cycle due to inflation pressures.”
Treasury 10-year yields will end this year at about 3 percent and end next year between 3.5 percent to 4 percent, Martier said. The rate will be at 2.79 percent by Dec. 31 and 3.21 percent by the end of 2014, according Bloomberg surveys of banks and securities companies, with the most recent predictions given the heaviest weightings.
Fed Chairman Ben S. Bernanke and his colleagues will reduce monthly Treasury purchases to $35 billion from $45 billion at next week’s meeting and maintain mortgage-bond buying at $40 billion, according to the median forecast in a Sept. 6 Bloomberg survey. The Federal Open Market Committee has pledged to keep the benchmark rate near zero at least as long as unemployment exceeds 6.5 percent and the outlook for inflation is no more than 2.5 percent.
The central bank won’t get to the point where they “outright sell” their assets holdings and its benchmark rate will probably remain close to zero through most of 2015, Martier said.
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