US bond yields could rise considerably to up to 5.5%, driven by the widening budget deficit and strong economic data, according to Geoffrey Dennis, an independent emerging markets commentator.
US 10-year treasury yield is currently at 4.768%.
“While the economy stays strong and the budget deficit continues to widen, it’s around 6% of GDP now, I don’t see any alternative but for bonds to remain somewhat under pressure over the next several months, and that’s going to be the big driver of markets generally,” he said.
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A rising deficit requires the government to issue more bonds to fund its spending, which increases the supply of bonds in the market. This often leads to lower bond prices and higher yields, as investors demand better returns to absorb the additional supply.
Dennis explained that there is substantial market uncertainty regarding President-Elect Donald Trump’s…
