US Bond yields experienced a rollercoaster ride in 2023, reaching a peak of 5.02% in October before plummeting on a wave of optimism about falling inflation and potential Fed rate cuts. This dovish sentiment drove yields to a three-month low of 4.10% by November.

US Bond Yields in 2024: A Gentle Descent or Bumpy Road Ahead?

Rallying Resilience: Will the Jobs Report Spoil the Party?

But November delivered a plot twist – a surprisingly strong jobs report revealed the US economy’s resilience, sending yields back up to 4.19%. This ignited concerns about whether the recent yield decline was premature and hinted at a potential for future upward trends.


US Bond Yields as of 8:56 AM PST, Thursday, December 14, 2023

MaturityYieldChange (bps)Change (%)
U.S. 10Y3.950%-0.085-2.13%
U.S. 30Y4.103%-0.081-1.95%
U.S. 5Y3.873%-0.130-3.24%
U.S. 3M5.385%-0.006-0.11%
US 10Y T-Note Futures112.61+0.72+0.64%
Euro Bund Futures136.50+0.17+0.12%
US Bond Yields

Notes:

  • bps = basis points
  • % = percentage change
  • PST = Pacific Standard Time

Future Forecasting: A Gentle Slope, Not a Cliff Dive

Looking ahead, the picture softens. A recent Reuters poll predicts a more moderate descent for yields in 2024, not a repeat of the recent plunge. By February’s end, they’re projected to reach 4.25%, followed by a gradual decline to 4.10% by May and ultimately settling at 3.88% in a year. This trajectory suggests a slow, controlled descent, not a dramatic plummet.

Market Vs. Economists: Discord on the Timeline

However, economist predictions paint a more cautious picture. They anticipate the Fed holding rates steady until at least July, with only a modest 100 basis point cut in the second half of 2024. This slower timeline raises questions: will the market’s optimistic expectations for swifter cuts lead to a yield correction in the interim?

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Correction Concerns: Buckle Up for Turbulence

The poll reveals a significant concern among a 74% majority of respondents – the high likelihood of a yield correction within the next three months. This shift in sentiment underscores the growing uncertainty in the market, suggesting investors should expect choppy waters ahead.

Inflation as the Wildcard: Tuesday’s CPI Could Reshape the Landscape

Inflation data plays a crucial role in yield trends. Tuesday’s key CPI release holds significant weight, as an expected drop to 3.1% could reignite rate cut hopes and further influence the direction of yields.

Fed’s Guiding Hand: This Week’s Meeting Sets the Tone

Ultimately, the Fed’s two-day policy meeting this week stands as the most pivotal event for US bond yields in the near term. Their communication will define the market’s expectations and set the stage for the coming months. Will they follow the dovish whispers, or strike a more hawkish tone?

Beyond Yields: The Recession Looms, But the Jury’s Still Out

The shadow of recession continues to linger. While some, like Thomas Simons of Jefferies, predict a Q1 2024 downturn, most remain cautiously optimistic. The interplay of yield movements, inflation, and Fed policy will ultimately determine the economic trajectory, and clarity will likely emerge in the months ahead.

Navigating Uncertain Seas: Stay Informed, Stay Flexible, Stay Tuned

In this dynamic and unpredictable market, adaptability and information are key. The Reuters poll offers valuable insights, but remember, it’s a snapshot, not a crystal ball. Keep your eyes peeled for economic data, central bank pronouncements, and geopolitical developments. By staying informed and navigating the choppy waters with flexibility, you can navigate the US bond yield landscape in 2024 and potentially secure favorable investment opportunities.

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This blog post is your compass, guiding you through the twists and turns of US bond yields in 2024. Stay informed, stay flexible, and stay tuned for the next chapter in this captivating saga.

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