The 10year Treasury Note yield may be on the verge of breaking out of its slump. After stabilizing over the past several weeks, Wells Fargo Securities Michael Schumacher predicts the current risk backdrop will reenergize yields in the coming weeks. He lists the Federal Reserves high level of comfortableness surrounding rising inflation, the massive amount of fiscal and monetary stimulus in the pipeline and the economic datas strength.
The 10year yield is hovering around 1.50, falling almost 5 over the past month. But its up 70 so far this year and 155 over the last 52weeks. Schumacher expects the 10year yield to end the year between 2.10 and 2.40.
And, that could become a wakeup call for investors and government officials as soon as May. Schumacher notes thats the last base effect month, a term used by economists to describe an abrupt increase or decrease in data. Thats going to pose a difficult problem frankly for the Fed and further policymakers, Schumacher said. Theyll have to figure out, hey, is this actually a real increase in inflation? Is it going to be sustained or is going to be shortlived?