5 Reasons Why Rate Increases Are Likely To Slow In The Months Ahead

Investors have increasingly become disquieted about the prospect of rising inflation accompanied by higher interest rates. There is logic to such concerns. We believe gross domestic product (GDP) growth of 7% in 2021 is attainable. If achieved, that would be the fastest pace since 1984. Moreover, in March 2021, the annual inflation rate increased to 2.6%, the most rapid pace of price increases since August 2018.

Robust growth accompanied by higher inflation is traditionally a recipe for higher interest rates. We agree. The rise in the 10-year Treasury bond yield from 0.50% to a post-pandemic high of 1.75% reflects the improving outlook for growth and inflation. The question becomes: is there more to come?

Never say never, but we believe long-term rate increases from here will be more gradual, and the 10-year yield likely rangebound between 1.5% to 2.0%, for several reasons:

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These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions ...

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