Treasury Yield May Fall 150 Basis Points Next Year, Jupiter Says

Yields on 10-year Treasuries may fall as much as 150 basis points before the end of next year as the Federal Reserve cuts interest rates to bolster a slowing US economy, according to Jupiter Asset Management.

The Fed’s most aggressive rate-hike cycle since the 1980s will take a toll on economic growth, and prompt the central bank to execute a policy pivot, said Matthew Morgan, head of fixed income at Jupiter Asset. The firm managed around $63 billion of assets as of end-March.

Markets “can easily see yields coming down 100, 150 basis points at the long end if a recession starts to bite,” Morgan said in an interview in Singapore on Wednesday. “And that can be really quite violent — particularly if growth is falling while inflation is falling.”

US 10-Year Yields Were Last Under 2.5% in 2022

After a tumultuous 12 months characterized by large swings in Treasuries, investors are trying to gauge when the US central bank may switch to cutting rates, with some predicting a recession. Prominent voices such as DoubleLine Capital’s Jeffrey Sherman say an easing is inevitable although others including Bill Gross caution against positioning for a bond bull market.

Money markets are pricing for the Fed to unleash as much as 125 basis points of rate cuts in 2024.