TD Securities Lower Year-End 10-Year Yield Forecast To 1.75%

TD Securities note that they have lowered their "year-end 10-Year forecast from 2.00% to 1.75%. This is a little below the market consensus of 1.80% but above forwards of 1.35%. Apart from incorporating the decline in rates over the past month, our forecast acknowledges that the Fed may be uncomfortable with too much of an inflation overshoot for too long."

• "We continue to forecast higher rates based on the following assumptions: solid economic recovery despite risks from Delta, $3-4tn fiscal package passed by year-end & Fed tapering at year-end, hiking in December 2023."
• The market is pricing in tapering in December 2021, and the first Fed hike in June 2023, the terminal rate of 1.30%, and 10-Year term premium at -1bp. We believe that the first hike timing should remain well in the future, but the terminal rate should increase from current lows. In addition, term premium and forward real rates should rise amid supply pressure and Fed tapering."