Higher bond yields won't disappear any time soon, according to economists surveyed by The Wall Street Journal this month, meaning continued pressure on anyone looking for a new mortgage, businesses planning to borrow and the heavily indebted federal government. The benchmark 10-year yield rose from 4.2 percent at the start of the year to 5.1 percent this week, and roughly three-quarters of economists think it will end this year at 5 percent or higher.
The latest survey received forecasts from 71 academic, financial and business economists, and more than a third expect yields to remain at 5 percent or higher through 2027. The forecasts for sustained higher yields reflect a mix of improving growth, inflationary pressures that have prompted the Federal Reserve to raise short-term interest rates and concerns about the US fiscal trajectory, the Journal reported.
The panel sharply revised its forecast for growth in inflation-adjusted annualized gross domestic product to 3.1 percent for the third quarter, up from 2 percent in the July survey. Of 64 economists who provided forecasts in both surveys, 60 saw growth for the quarter moving higher, according to the Journal. Economists expect the economy to add 56,000 jobs a month on average over the next year.
One reason for the higher bond yield forecast is oil. Economists forecast that the US oil-price benchmark will end 2027 at about $75 a barrel, down from $101 at the close on Friday but up from $67 before the US and Israel attacked Iran at the end of February, Yonhap reported. In turn, their forecasts for inflation as measured by the consumer-price index fall to 2.3 percent by the end of 2027, offering eventual relief if the projections hold.
The 30-year Treasury yield has climbed to 5.48 percent, and the pressure of interest burdens is expected to persist for individuals seeking mortgage loans, companies looking to raise capital, and the US federal government, which is carrying a massive amount of debt, Yonhap reported. Investors are now watching the Treasury's November 4 quarterly refunding statement for signals on auction sizes for longer-dated bonds, after spotty demand for 20- and 30-year paper in recent sales.