Treasury Sell-Off Looks Overdone, Capital Economics Says
Dow Jones
Sep 28
0935 ET - Capital Economics thinks the Treasury sell-off mainly comes from changes in near-term rate expectations. The 10-year yield is near its June 2007 high, and economist James Reilly says it reflects higher oil and a strong US economy more than AI debt issuance or fiscal concerns. He says in a note he expects the 10-year yield to "drop all the way to 4.25% by the end of 2027 as the Fed fails to tighten by as much as investors are discounting." He believes that while AI debt issuance will continue to be a source of upward yield pressure, the effect is smaller than headlines suggest and will be outweighed by changes in monetary policy expectations. As for fiscal concerns, he adds that there hasn't been any meaningful fiscal news lately to warrant the yield surge.
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