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.
