Mark Cabana, head of U.S. rates strategy at Bank of America, said U.S. bond yields are poised to move slightly lower going forward given that the Fed will keep interest rates high for an extended period of time before eventually cutting rates at a slower pace than market expectations.
“We envision a much harder 10-year yield of 5% than 3%,” Cabana said.
“You’re not going to see yields come down quickly, but we still think yields are going to come down as the Fed cuts, just more slowly than the market expects.”
Cabana said the bank’s strategists advised clients to trade the back end of the U.S. Treasury yield curve with a “tactical bullish bias.”
Cabana said that what will eventually lead to lower yields is some kind of economic driver, such as U.S. inflation data for July due tonight.
