Salient to Investors:

  • The median Wall Street forecast predicts the 10-yr T-yield to rise to 3.01% by the end of 2015, the 2-yr to rise more than double to 1.53%, and the 30-yr to rise to 3.70%. Wall Street calls for higher T-yields in 2015 are the most aggressive since 2009, when US debt securities suffered record losses.
  • Futures indicate an 88% percent chance the 2-yr will be at 1% or less.
  • 20% of investors, traders and analysts polled last month picked government bonds as the most likely asset to decline in 2015.
  • Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ said 2015 should be the break-out year finally, and the market is wrong in ignoring Fed rhetoric that it is nearing tightening – expects the 10-year yield to rise to 3.4% by the end of 2015.
  • Boris Rjavinski at UBS said things are pointing to a pretty healthy recovery.
  • Peter Fisher at BlackRock Investment Institute said US interest rates will rise in 2015 and sees a global divergence in monetary policy and growth.
  • Guy LeBas at Janney Montgomery Scott said any rate increase will be tempered as the increasing number of older Americans leads to less spending and slower inflation while boosting demand for low-risk, fixed-income assets, and predicts the 10-year yield to end 2015 at 2.47%. The Census Bureau reports Americans 65 years old or older reached 14.2% of the US population in 2014 versus 12.4 % a decade ago.
  • Ira Jersey at Credit Suisse said increasing wage growth, stronger employment and the lowest gasoline prices in 5 years will boost household spending. Credit Suisse predicts 10-yr yields to rise to 3.35% by the end of 2015.

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