Capital Economics said the recent sell-off in U.S. Treasurys has been driven mainly by a shift in near-term interest-rate expectations rather than by concerns tied to AI-related bond issuance or fiscal developments. The firm noted that the 10-year Treasury yield is now close to its June 2007 high. Economist James Reilly said the move appears to reflect higher oil prices and a strong U.S. economy more than the other narratives that have gained attention.
Reilly expects the 10-year yield to fall sharply to 4.25% by the end of 2027 if Federal Reserve tightening proves less aggressive than investors currently expect. He added that while AI-related issuance should continue to put upward pressure on yields, the effect is smaller than some media coverage suggests and is likely to be offset by changes in monetary policy expectations. On fiscal concerns, he said there has been no substantive recent fiscal news that would justify a sharp surge in yields.
According to BlockBeats on Sept. 28, Capital Economics said the recent sell-off in U.S. Treasurys has been driven mainly by changes in market expectations for near-term interest rates.
The firm said the 10-year U.S. Treasury yield is now close to its June 2007 high. Economist James Reilly said the move reflects rising oil prices and a strong U.S. economy more than AI-related bond issuance or fiscal concerns.
Capital Economics' view on yields
Reilly said the 10-year Treasury yield will "fall sharply to 4.25%" by the end of 2027 as Federal Reserve tightening comes in below what investors currently expect.
He also said AI-related issuance will continue to add upward pressure to yields, but the effect is not as large as some media reports suggest and should be offset by changes in monetary policy expectations.
On the fiscal side, Reilly added that there has been no substantive recent fiscal news that would be enough to trigger a sharp jump in yields.
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