Bank of America (BofA) expects that 10-year US Treasury yields will fall next year. This is explained by the fact that the Federal Reserve System (Fed) slows down the monetary tightening and lowers interest rates. The Fed takes these steps to stimulate the US economy.
According to Mark Cabana, an expert at BofA, the US economy will enter recession around mid-2023. By the end of the year, this event will push the Fed to lower rates and will send yields, which move inversely to prices, lower across the curve.
The expert says that the predicted a slowdown in the pace of rate hikes will partially reduce the volatility that frustrated investors this year during a sharp fall in stock and bond prices.
Cabana believes that the central bank to raise rates three more times until it reaches a terminal rate of 5.25% next March. According to the economist, there is a possibility that politicians will be cutting rates in December 2023.