ING: Stretching Beyond 4.00% For 10s

ING write “it’s been rapid fire in terms of view updates for U.S. 10s in the past few months, from 3.00% to 3.50% to 3.75% and then 4.00%. We’ve taken this step-by-step, and the common denominator is ongoing upward revisions.”

• “It feels like that should be getting to something that feels more like a terminal peak. Already the risk-free rate plus the median high yield spread pitches the all-in financing rate here in double-digit territory, elevating default risk coming from pure funding pressure. New corporate sector projects also get tougher to rationalize. The same goes for the personal sector where re-financing is an issue, and flexi credit payments hurt. These factors should begin to bite in, allowing the Fed to pause (code for peak).”
• “In such circumstances, and assuming the funds rate does not have to actually hit 5%, then the 10-Year can target 4.25% (with a risk to 4.50%).”