The yield on the U.S. 10-year Treasury note, which stands near a 16-year high, is likely to fall significantly for the rest of the year and in 2024, according to economists at Capital Economics.
The yield on the 10-year Treasury BX:TMUBMUSD10Y was marginally lower at 4.257% on Friday versus Thursday’s 3 p.m. level of 4.260%. It reached as high as 4.339% in August, the loftiest level since 2007, according to Dow Jones market data. However, Diana Lovanel, markets economist at Capital Economics, said she doesn’t think continued disinflation can only be achieved by central banks keeping their policy rates elevated for longer. “We don’t think a period of much slower growth is necessary for inflation to get all the way back to the Fed’s target,” Lovanel wrote in a Friday note.
The labor market has been normalizing, which could bring wage pressure back to a level consistent with the 2% inflation rate, she wrote. Cooling rents could also drag down the inflation rate in the U.S., noted Lovanel.
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