George Smith used to enjoy reviewing the previous year’s interest rate predictions at year end. Last year’s Bloomberg survey of the top investment bank analysts indicated an average prediction of 3.48% for the 10-year Treasury at year end 2023. With one week to go the 10-year sits at 3.88% today, exactly where it closed at year end 2022. It dropped as low as 3.26% in April (flight to quality in the wake of the big regional bank failures) and then peaked at about 5.03% in October (as inflation seemed “entrenched” and “higher for longer” Fed speak spooked markets). It looks like Barclays and Deutsche Bank are pretty close with their predictions.
Speaking of the 10-year Treasury, Fed governor Goolsbee expressed “confusion” by market reaction to last week’s Fed meeting. He commented that markets “hear what they want to hear” and not “what the Fed Chair says.” Markets actually weren’t phased by his comments (these type of Fed comments lately are perceived as mandatory “more bark than bite” hawkish smoke screens). The futures market is predicting an 83% chance of a rate cut by the March 20 meeting (89 days from now but who’s counting?). As we say goodbye to a volatile year in capital markets, we wish everyone a safe and happy holiday season. Stay tuned…
| END-2023 TREASURY YIELD FORECASTS | ||||
| 10Y | ||||
| Bank of America | 3.25% | |||
| Barclays | 3.75% | |||
| Citi | 3.25% | |||
| Deutsche Bank | 3.65% | |||
| Goldman Sachs | 4.30% | |||
| JPMorgan | 3.40% | |||
| Morgan Stanley | 3.50% | |||
| MUFG | 3.375% | |||
| NatWest Markets | 3.35% | |||
| RBC | 3.45% | |||
| Societe Generale | 3.25% | |||
| TD | 3.25% | |||
| 2022 Closing Level | 3.87% | |||
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.
