BMO Map Out Their Overview For The Longer End

BMO note that "that the most prevalent outlook for 2021 at the beginning of the year assumed the H2 was poised to see an even higher plateau for real growth established. Between the delta variant, front-loaded stimulus, stagflation risks rather than reflationary spiral, and a notably slower progression out of the pandemic than the early-vaccine calculus implied, the market finds itself in what might prove to be a sustainably lower rate range than expected well into Q4 if not beyond. We continue to view the 1.77% March peak in 10-year yields as the upper bound for the year and the current move is the process of defining the floor for US rates. This is consistent with our broader range-trading thesis; even though momentum is decidedly bullish at the moment."

• "In estimating how low yields can go in the present environment, we'll suggest that the extent to which the bullish repricing can extend is as much a function of time as it is of absolute levels. While uncertainty doesn't have an expiration date, the most recent round of covid jitters have yet to be fully reflected in the outlook. It's during the period between now and the September 22 FOMC meeting that we anticipate 10- and 30-year yields we reach their respective lows. The logic is relatively straightforward. First, investors will have a better grasp of the delta fallout by mid-Sept and as the next chance to see a policy shift, concerns the Fed is stepping away too quickly from accommodation will persist. Second, investors still are not net long; while that might not ultimately come to fruition, the specter of such an eventuality will weigh on yields in the coming weeks."
• "In 10s, backfilling the opening gap of 1.09-1.10% is our next bullish target. Beyond there looms 0-handle 10s. A dip below 1.0% is on the table even more convincingly after today's price action and the lack of an obvious impetus. That said, any such rally would be brief and attributed to the limited conviction summer trading condition. This isn't to suggest it would detract from the technical significance of the move; although the issue would question become one of sustainability given the backdrop of inflation and above-trend growth. In the long bond, the zone of 1.60%-1.75% is similarly achievable and perhaps with more staying power in an environment with energy off the highs and the coronavirus contributing to the 'transitory' inflation scenario."