As the financial markets closely monitor the movements of US 10-year bond yields, investors are eager to gain insights into the future outlook and forecasts from industry experts. In this article, we turn to Althea Spinozzi, Senior Fixed Income Strategist at Saxo Bank, to provide her analysis and predictions regarding the trajectory of US 10-year bond yields.

Over the past several months, these bond yields have shown a period of consolidation following a robust two-year uptrend. With this stabilization, the question arises: What can we expect next? Spinozzi's expertise in fixed income instruments offers valuable insights into the current market situation and sheds light on the potential future developments in long-term yield rates.

Spinozzi suggests that there may still be limited upside for long-term yields in the US during the summer, contingent upon the Federal Reserve's decisions to hike interest rates while economic growth remains robust. However, she finds it challenging to envision 10-year yields surging to the 4% mark. As the number of rate hikes increases, the probability of the long end of the yield curve starting to decline rises, making a soft landing scenario less likely.

FXMAG.COM: For several months, US 10-year bond yields have been consolidating after a 2-year robust uptrend, what's next?

Althea Spinozzi, Senior Fixed Income Strategist:

I believe that there is still some limited upside for long term yields in the US during summer only if the Federal Reserve hikes rates while growth remains robust. However, I find it hard to envision ten-year yields to soar to 4%. The more hikes, the higher the probability for the long part of the yield curve to start to fall as a soft landing it ruled out.

Also, we have to take into account that the Federal Reserve has not started to actively sell bonds under its balance sheet. We expect discussions surrounding disinvestments in the balance sheet to pick up after summer, as the Fed tries to underpin long term yields in order to avoid a further inversion of the yield curve. The ultimate goal is to continue to tighten the economy, and in order to do that, the fed will need to talk hawkish to support the front part of the yield curve and to begin with an active Quantitative tightening.

Overall, in the next few weeks up to the Fed's July meeting we expect ten-year yields  to trade rangebound between a wide range of 3.64% and 3.90%. After summer the path for yields is less certain as it depends on monetary policies and economic activity.