US Treasury yield may hit 4% by year-end, says expert

A former bond manager at BlackRock says the yield on 10-year Treasuries may hit 4 per cent by the end of this year, pitting him against many on Wall Street who expect a shallower sell-off in bonds.

“We are going back to the world as we knew it before the crisis,” said Stephen Miller, now an investment consultant for Grant Samuel Funds Management in Sydney.

Bond investors are underestimating the pace of monetary policy tightening needed at a time of broad global economic growth and a return of developed economy inflation to levels that will be much closer to central bank targets, said Miller, who spent 14 years at BlackRock, where he headed its fixed-income team in Australia.

As markets adjust to that environment in a US economy with robust corporate profits, the 10-year yield will rise to between 3.5 per cent and 4 per cent by the end of 2018 as central bank stimulus is continually wound down, he said.

Ten-year Treasuries traded with a yield of just under 2.9 per cent on Thursday.