First Group Bank analysts said in a note that uncertainty over the inflation outlook could push US long-term Treasury yields higher over the next few months. They flagged the risk of inflation prints surprising to the upside and said the extent of the Fed’s response remains uncertain. Combined with continued expansionary US fiscal policy, the analysts see a bias toward higher long-term yields. They also note short-term yields already price more hikes than the analysts expect, and ongoing market

First Group Bank analysts said in a note that uncertainty over the inflation outlook could push US long-term Treasury yields higher over the next few months. They flagged the risk of inflation prints surprising to the upside and said the extent of the Fed’s response remains uncertain. Combined with continued expansionary US fiscal policy, the analysts see a bias toward higher long-term yields. They also note short-term yields already price more hikes than the analysts expect, and ongoing market speculation on rate moves is likely to keep short-term yield volatility elevated.