Benchmark 10-year Treasury yield could top 7%: Ned Davis Research
© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File PhotoNEW YORK - Investors should be prepared for long-duration Treasury yields to reach 7% if the U.S. economy skirts a widely anticipated recession, Ned Davis Research warned in a note on Tuesday.
Joseph Kalish, chief global macro strategist at Ned Davis Research, said the Treasury sell-off could continue if the neutral rate of interest - the rate at which monetary policy is neither contractionary nor expansionary - rises due to a prolonged expansion. Add a term premium for longer-dated debt, which pre-pandemic averaged 1.65% for the period since 1961,"and you get 7.20%," he said.With the potential for a worsening Treasury market sell-off, Kalish is bullish on gold and remains slightly underweight bonds, and favors large-cap equities over small-caps, he noted.
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