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Investment Institute
Macroeconomic Research

The key drivers of 10-year US Treasury yields

  • 18 January 2024 (7 min read)

Deconstructing 10-year UST drivers and the direction they could take in 2024

  • We analysed the sharp rise and subsequent fall in 10-year US Treasury yields, looking at the key components – the neutral rate, inflation expectations and term premia. We present a simple model of yields based on macro variables
  • We suggest each of the core components has contributed to a rise in yields compared to levels seen in the mid-2010s
  • Our yield model suggests, based on our forecasts – and market consensus – that we are unlikely to see 10-year yields fall significantly below current levels of around 4%
  • We believe there are some indicators that show concerns over fiscal sustainability have pushed yields up over the past year. We will monitor this in the context of the coming election, with neither Presidential candidate currently suggesting that Federal debt reduction is a priority

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