The 10-Year Treasury Yield (TNX) is expected to rise to 4.75% through the end of 2025, according to a recent report by BofA Global Research. This forecast comes as BofA's U.S. economists revise their outlook, anticipating no further Federal Reserve rate cuts due to persistent inflation and a robust labor market. "Our US economists revised their Fed call & now expect no further cuts over the forecast horizon," BofA analysts state, highlighting the Fed's extended hold stance. The report suggests that the Fed's focus on maintaining a strong labor market has been met, reducing the need for additional cuts.
BofA's revised rate forecasts reflect a 50 basis point increase across the horizon, aligning with expectations for stable economic growth of 2-2.6% y/y and core PCE inflation of 2.1-2.6% y/y through 2026. The analysts maintain a "slight constructive duration bias," favoring 5s30s steepeners and a flatter swap spread curve. They also anticipate higher duration demand as rates approach the upper end of the post-COVID range, with the 10-year yield potentially reaching 5%. "We expect increased demand as 10 y reaches towards the upper end of post COVID range (5%)," the report notes, emphasizing the potential for ongoing headwinds from higher rates into risk assets.