US 10-year Treasury yields to move toward 3% this year - BBH

Analysts at BBH note that the US 10-year Treasury yields held above the 2.60% mark all last week as they rose ahead of the weekend even though the first estimate of Q4 17 GDP missed the mark (2.6% instead of 3.0%), but the details were good. 

Key Quotes

“Specifically, final domestic sales rose a smart 4.3%, the best in a few years.  Inventory and trade, two components which are not particularly sensitive to monetary policy took 1.8 percentage points off growth, and part of this seems to storm-related.  Inventories look lean and re-stocking could help lift growth later in 2018).”

“Many are looking for a move toward 3% this year.  Several high-profile asset managers have already concluded that the roughly 35-year downtrend in US long-term yields is over.  Depending on precisely how one draws the trendline (art not science), it would seem to come in between around 2.67% and 2.80%.”

“That said, the technical indicators for the March futures contract are warning against establishing new shorts.   A correction appears to be nearly at hand.  There are important data in the coming days, like the January jobs report, auto sales and the employment cost index, and important events, like the FOMC meeting, the Treasury's refunding announcement and the State of the Union address.  A move in the March contract above 123-00 warns that the choppy consolidation may be a prelude some short-covering.”