Bond Yields Should Continue Their Uptrend

Concerns about a trade war recently drove down U.S. 10-year yields to about 2.85%. Market positioning expecting the Federal Reserve (Fed) to slow down its monetary tightening in the near term appears misplaced, however, especially given rising inflation risks. We expect the U.S. 10-year yield to end the year at about 3.30%, and a sharper increase seems more likely than a steep decline.