Intel stock spikes after report of possible US government stake
Investing.com -- Capital Economics, a leading economic research firm, maintains its projection that by the end of this year, yields on 10-year government bonds will likely remain at or fall below their current levels, despite the recent significant fluctuations in global sovereign bond markets. The firm also anticipates that corporate bonds will generally continue to perform well.
The decline in long-dated U.S. Treasury yields over the past week indicates a relaxation of concerns regarding U.S. fiscal policy. However, the concerns have not fully dissipated, as evidenced by the 10-year Treasury yield remaining over 30 basis points higher since April.
This increase coincided with the advancement of President Trump’s deficit-increasing legislation through the House of Representatives. Analysts attribute the rise primarily to an uptick in the Treasury 10-year term premium and a steepening of the U.S. yield curve.
Capital Economics suggests that U.S. term premia might decrease slightly, despite the troubling state of U.S. public finances. This forecast is based on the current dislocation in the U.S. Treasury market following "Liberation Day," a reference to a past event affecting the market.
The firm notes that Treasury term premia were already elevated before the recent fiscal concerns arose and anticipates that if trade deals progress, the increased term premia may continue to unwind.
In addition, 10-year government bond yields in other developed markets have generally tracked the uptrend of U.S. Treasuries this month. The rise in Treasury term premia is believed to have also contributed to higher term premia internationally, as suggested by steeper yield curves globally.
In conclusion, Capital Economics expects a decrease in the 10-year Treasury term premium, which could align with a slight reduction in term premia for other high-grade 10-year government bonds in developed markets.
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