Ubs Forecasts Drop In 10 Year Bond Yield

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Ubs Forecasts Drop In 10 Year Bond Yield

UBS Forecasts 3.5% Yield For US 10-Year Bonds In The Next 12 Months

According to the latest forecast made by UBS analysts, the yield for 10-year US bonds will be near 3.5% in the next 12 months. For now, the yield for the 10-year bonds was near 4.11% at the start of the month and closed near 4.61%.

So, if we consider the forecast made by the UBS analysts, it appears that the yield will likely drop in the next few months. Given the record high levels of the US 10-year bond yields, it makes sense for it to cool down as we approach the end of 2023 and the start of 2024.

Bearish Forecast For 10-Year Bond Yields

The base case presented by the UBS is a 3.5% yield during the next 12 months. A more bullish scenario eyes the yield near 4%, while the bearish scenario eyes the yield near 2.75%.

If the bond yield drops to 2.75% in the next 12 months, it will also signal the start of a recession in the US economy. In that case, any further drop in the US bond yields will also become a high probability.

So, if the base case translates into reality, it will mean a change of 14%. In case of any upside surprise, a change of 10% in the current yield will take place. In the event of downside pressure, a change of up to 20% will take place in the bond yields.

Given the bullish sentiment surrounding the US bond yields, the forecast made by the UBS seems more like a far-fetched story rather than an actual forecast. But we all know that markets can change in the blink of an eye - So even a bearish forecast surrounding the 10-year bond yields can't be ruled out.

A factor that adds credibility to the UBS forecast is the fact that rate cuts will start during Q1 2024, according to many experts. So, if we take that into account, it makes sense for the bond yields to fall during that period as well.

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