U.S. Bond Sentiment Is Worst Since Disastrous ’09
By Liz Capo McCormick and Susanne Walker Dec 29, 2014 11:01 AM ET
Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.
With Federal Reserve Chair Janet Yellen poised to raise interest rates in 2015 for the first time in almost a decade, prognosticators are convinced Treasury yields have nowhere to go except up. Their calls for higher yields next year are the most aggressive since 2009, when U.S. debt securities suffered record losses, according to data compiled by Bloomberg.
Getting it right hasn’t been easy. Almost everyone who foresaw a selloff this year as the Fed ended its bond buying was caught off-guard as lackluster U.S. wage growth and turmoil in emerging markets propelled Treasuries to the biggest returns since 2011. Now, even as the bond market’s inflation outlook tumbles, forecasters are sticking to the view that Treasuries are a losing proposition as the economy strengthens.
“Next year should be the break-out year finally,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., said by phone from New York on Dec. 23. “The market is ignoring the rhetoric that Yellen and the FOMC is getting closer and closer to tightening. The market has it wrong.”
Bearish Forecast
Rupkey, who is among the 74 economists and strategists surveyed by Bloomberg this month, has one of the highest projections. He said he expects 10-year yields to rise to 3.4 percent by the end of 2015 from 2.20 percent at 10:57 a.m. in New York. Back in January, Rupkey said yields would be 3.6 percent by now. Yields fell today with German peers as Greek Prime Minister Antonis Samaras failed in his final attempt to get his candidate for president confirmed.
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http://www.bloomberg.com/news/2014-12-29/u-s-bond-sentiment-is-worst-since-disastrous-09-as-fed-shifts.html
