Natixis's Joseph Lavorgna noted....>

US TSYS/RESEARCH: Natixis's Joseph Lavorgna noted the US 10-year note yield is

at "a 6-month high." He adds "expectations of deficit financed tax cuts and

quantitative tightening should put upward pressure on long- term yields. But how

high will they go?" 

- He thinks the "market's expectation of the terminal fed funds (rate) is highly

correlated with 10-year yield. This is captured in the 5-year forward overnight

indexed swap (OIS)," an "excellent proxy for the terminal fed funds rate. It is

currently yielding around 2.37%. For 10-year yields to go meaningfully higher,

Fed tightening expectations may have to rise accordingly." 

- He added "the last time the 10-year Treasury note was yielding 3%, the 5-year

forward OIS was trading at 4.20%." 

- So, the "upshot is that the rise in long-term yields may be capped in the

short-term by expectations of only gradual Fed tightening," he said.