A Wild Ride for US 10-Year Yield in 2023: Ending Where It Began
Quiver Quantitative — The year 2023 has been a rollercoaster for the US 10-year Treasury yield (TLT), characterized by dramatic fluctuations but ending the year remarkably close to where it started. This outcome stands as a stark contrast to the tumultuous journey the yield has undergone, encapsulating the uncertainty and volatility that have dominated financial markets.
Throughout the year, the yield on the 10-year Treasury experienced a wide range, dipping to a low of 3.25% during the March banking crisis, then escalating beyond 5% for the first time in 16 years. This volatility mirrors the broader market dynamics, which initially anticipated a recession only to be countered by a resilient economy and consistent Federal Reserve rate hikes up until July. This unexpected economic resilience caught many Wall Street strategists off guard. Despite this, predictions for 2024 suggest a potential economic slowdown and possible Federal Reserve rate cuts, though the path may not be straightforward.
Market Overview: -US 10-year Treasury yield closes 2023 practically unchanged from its starting point at 3.9%. -Year marked by extreme volatility, with rates swinging between 3.25% and 5% amid recession fears and economic resilience. -Late-year bond rally fueled by weakening data and Fed dovish tilt, despite no significant annual yield shift.
Key Points: -Wall Street strategists largely missed the mark, initially expecting recession followed by a 2024 rate-cutting bonanza. -Bond investors saved by late-year surge, recovering from potential third straight year of losses. -Market anticipates over 150 basis points of rate cuts next year, with first potential easing in March.
Looking Ahead: -Expect continued volatility in 2024 as
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