作为一位有着近30年市场经验的老手，Arif Husain表示，美国财政部为填补政府赤字而持续发行的债券正使市场充斥着新的供应，与此同时，美联储试图在多年购债之后缩减其资产负债表的举措已经消除了对政府债券的一个关键需求来源。Arif Husain还表示，美债收益率曲线可能会进一步趋陡，因为短期美债收益率的任何上行都将受到降息的限制。US asset management company T. Rowe Price stated that with rising inflation expectations and concerns about US fiscal spending, the yield on the benchmark 10-year US Treasury bond may soon reach a key level.
As of the time of writing, the 10-year US Treasury bond yield is at 4.130%.
The last time the 10-year US Treasury bond yield touched 5% was in October of last year, when concerns about maintaining high rates for a longer period clouded the market sentiment. Arif Husain's forecast contrasts sharply with the market's expectation of a decline in US Treasury yields following the Fed's rate cut last month. Strategists currently generally expect the 10-year US Treasury bond yield to fall to 3.67% by the second quarter of next year. If Arif Husain's forecast proves correct, the market will face turbulent repricing. This also highlights that as better-than-expected economic data raises doubts about the Fed's pace of rate cuts, the debate over the outlook of the world's largest bond market is becoming increasingly heated.
With nearly 30 years of market experience, Arif Husain stated that the continuous issuance of bonds by the US Treasury to cover the government deficit is flooding the market with new supply, while the Fed's efforts to reduce its balance sheet after years of bond purchases have eliminated a key source of demand for government bonds. Arif Husain also mentioned that the US bond yield curve may steepen further because any rise in short-term US bond yields will be limited by rate cuts.
It is worth noting that Deutsche Bank's private banking department stated last month that by September next year, the 10-year US Treasury bond yield is expected to reach 4.05%. This forecast was proven correct in approximately a month's time. Additionally, a report released last week by BlackRock Investment Institute indicated that with the release of new economic data, longer-term US bond yields are expected to fluctuate in both directions.
Signs of cracks in the USA's financial situation provide evidence for Arif Husain's viewpoint. It is reported that by the end of the 2024 fiscal year in September, the US government's budget deficit exceeded $1.8 trillion, reaching the third highest in history; the country's debt interest costs have risen to the highest level since the 1990s. However, neither of the two presidential candidates has made deficit reduction a major policy, making US bonds a major risk for market participants.
Arif Husain states that for the Federal Reserve, the most likely scenario is a slight interest rate cut over a period of time, similar to the rate cuts from 1995 to 1998. In this case, potential global economic growth will create a clearer outlook for Federal Reserve officials.
Arif Husain also mentions the possibility of a normal easing cycle, during which the Federal Reserve will lower interest rates to a level closer to the neutral rate, possibly around 3%. He also considers a scenario where the US enters a recession, which would force the Federal Reserve to cut interest rates more aggressively. He adds: "Investors who, like me, believe that a recession is unlikely in the near future should prepare for a rise in long-term US bond yields."
