Yields for 10-year U.S. Treasurys have picked up substantially this year as the U.S. economy continues growing at a healthy pace and investors price in further tightening from the Federal Reserve.
Those increases should continue in the coming months, analysts say, with November's consensus estimate from the Blue Chip Financial Forecasts monthly report predicting 10-year Treasury yields will hit 3.5% in early 2020. That would be up from the current levels of roughly 3.2% and an increase from the 2.4% level at the end of the 2017.
The Fed, which kept its benchmark rate unchanged Nov. 8, is expected to hike rates again in December and has penciled in three increases next year. It also is continuing to gradually trim its balance sheet, which had peaked at about $4.5 trillion after the financial crisis.
The central bank's decision came nearly a week after the latest U.S. jobs report showed the country added 250,000 jobs in October. The U.S. economy grew at the somewhat slower pace of 3.5% in the third quarter, down from 4.2% in the prior quarter, but those figures are significantly above Fed officials' longer-run forecast of 1.8%.
Fed Chairman Jerome Powell has sounded upbeat about the "remarkably positive" economic data, saying the outlook suggests the Fed should keep gradually hiking its benchmark rate. The Fed may even "go past neutral" and begin holding back the economy through higher rates, following a decade of monetary stimulus, he said in an Oct. 3 appearance.
Those comments helped drive up yields for 10-year Treasurys past 3.2% for the first time since 2011. They drifted down to near 3.10% at the end of October but have returned to roughly 3.2% since that time.
In eight of the world's 15 largest economies, yields for 10-year government bonds have stayed relatively unchanged over the past month, with changes contained to single-digit basis point moves.
That includes Italy, where officials are battling with the European Union over a plan to increase their deficit to 2.4% of GDP in 2019 from 1.8% this year.
In the U.K., yields on 10-year bonds have fallen 18 basis points to 1.39% as British officials continue to try to reach a Brexit deal with the EU.
Brazil saw a more substantial decrease. Jair Bolsonaro, the far right-wing candidate, prevailed in last month's presidential elections, and yields have dropped 94 basis points over the past month to 10.25%.
In Mexico, incoming president President Andrés Manuel López Obrador said his administration would scrap the ongoing construction of an airport worth more than $13 billion. The country's bond yields have increased 61 basis points over the past month to 8.66%.
