BENGALURU (Reuters) - Reuters polled more than 100 fixed-income strategists covering major sovereign bond markets from around the world during the closing weeks of one of the worst first half of any year for bonds in decades.
Following are some of the highlights of their predictions for U.S. Treasuries, German Bunds and Japanese Government Bonds (JGBs).
- Just over half the respondents, 21 of 40, said the sell-off in major sovereign bond markets would last at least another three months.
- Asked what spread the European Central Bank, which is currently developing a policy tool to control the gap between German Bunds and select euro zone country yields, will no longer tolerate to Italian 10-year debt, strategists offered a median of 250-275 basis points. That spread is currently around 200 basis points.
- Over two-thirds of the respondents, 13 of 19, to a follow-up question said that level would be reached in the next six months.
Reuters Poll - Bond yield outlook https://fingfx.thomsonreuters.com/gfx/polling/byprjaabnpe/Reuters%20Poll%20-%20Bond%20yield%20outlook.png
- German 10-year Bund yields are expected to rise to 1.75% in a year, up from Friday's 1.20%. That is still well below this year's high of 1.926% hit just after ECB policymakers called for an emergency meeting on June 15 to discuss spreads.
- Only a minority of the respondents, 11 of 40, forecast 10-year yields on German Bunds to breach this year's high in 12 months, despite expectations for a succession of ECB interest hikes starting in July, bringing the deposit rate substantially higher by year-end.[ECILT/EU]
Reuters Poll - Major bond yields outlook https://fingfx.thomsonreuters.com/gfx/polling/lbpgnxxmdvq/Reuters%20Poll%20-%20Major%20bond%20yield%20outlook.png
- The German two-year Bund yield was predicted to trade at 1.50% in a year, more than 100 basis points higher than its level on Friday. If realized, that would be the highest since 2011.
- The yield on the 10-year U.S. Treasury note is forecast to rise to 3.20% in a year, compared with around 2.80% on Friday.
- Fifteen of 61 respondents predicted the U.S. 10-year Treasury yield to trade at a level above this year's high of 3.498% in 12 months.
- The 2-year T-note is forecast to yield 3.40%, with 14 of 33 respondents expecting it to trade at a level above this year's high of 3.456% in 12 months.
- The 2-10 year yield spread is forecast at minus 20 basis points in a year, the lowest in over a decade and the first inversion predicted since Reuters started polling on bond yields in June 2002.
Reuters poll - U.S. Treasury yield outlook https://fingfx.thomsonreuters.com/gfx/polling/lgpdwbbqbvo/Reuters%20poll%20-%20U.S.%20Treasury%20yield%20outlook.PNG
- JGB yield forecasts hardly show any change from the current level over the coming year, indicating the Bank of Japan will continue its policy divergence with its peers.
- Still, nearly one-half, 10 of 22, expect the 10-year JGB yield to breach the BOJ's 25 basis point yield cap in a year. Two analysts expect it to reach 0.40% or higher.
Reuters Poll - JGB yield outlook https://fingfx.thomsonreuters.com/gfx/polling/egvbkggbxpq/Reuters%20Poll-%20JGB%20yield%20outlook.PNG