Fixed Income Viewpoints: How High Will Bond Yields Go?

The Viewpoints series gives investors Lazard’s perspectives on the latest macroeconomic and fixed income news and trends. In this edition, Lazard Asset Management's fixed income team share their assessment on whether bond yields may rise further before the current tightening cycle concludes.

Bond markets delivered a jolt to investors in the waning days of summer: Long-term bond yields soared to their highest levels since the Global Financial Crisis in 2008.

The 10-year Treasury yield hit 4.33% on 17 August, having crept up 45 basis points (bps) since mid-July — and leaving startled investors to wonder, how high will it go?

The answer may be important to investors around the world. The 10-year yield is a reference rate for loans in the United States, notably mortgages, and it is used as the “risk-free” rate in many financial valuations. A significant rise in the 10-year yield now could put the brakes on what has so far been a resilient US economy, potentially affecting global growth.

That was the starting point of the conversation when Lazard’s fixed income professionals met this month. While inflation and the Federal Reserve’s course on interest rates in the months ahead figured prominently in the discussion, our experts uncovered other important market drivers — some that they believe should put a cap on Treasury yields for now.

The wide-ranging discussion included insights from Lazard’s market strategy teams and China specialists.

Click here to read this edition of Fixed Income Viewpoints in full.