Survey: Market pros see 10-year Treasury yield under 4% a year from now

According to investment analysts surveyed by Bankrate, Treasury yields are expected to decrease over the next 12 months, with an interest rate cut anticipated at the Federal Reserve’s September meeting. The Second-Quarter Market Mavens survey conducted by Bankrate revealed that experts in the market predict the 10-year Treasury yield to drop to 3.96 percent a year from now, down from 4.34 percent at the end of the survey period on June 28.

The majority of respondents in the survey foresee lower rates a year from now, with forecasts ranging from 3.40 percent to 4.50 percent.

“Higher for longer may well be a reality for interest rates and yields over the next six to 12 months, depending on the durability of the economic expansion,” says Mark Hamrick, Bankrate’s senior economic analyst.

“What’s not to like about a world where savers and investors are both rewarded? That’s a mix that we hadn’t seen for years before outsized inflation forced the Fed to begin tightening, lifting rates and yields,” adds Hamrick.

Forecasts and analysis

This article is part of a series discussing the findings of Bankrate’s Second-Quarter 2024 Market Mavens Survey:

• Survey: Stocks to gain 4% over the next year
• Survey: Market pros see 10-year Treasury yield under 4% a year from now
• Survey: Best ways to play falling interest rates, elections and AI, according to investing pros

10-year yield expected to be lower over the next 12 months, analysts say

Over the past two decades, the 10-year Treasury yield has mostly stayed below 5 percent. It reached a record low of around 0.5 percent in August 2020 during the Covid-19 pandemic when the Federal Reserve lowered interest rates to support the economy. As the economy recovered, the yield began to rise. Throughout 2023, the Fed raised rates more aggressively to combat inflation, leading to a gradual increase in yields.

Investment professionals surveyed by Bankrate anticipate the 10-year yield to be 3.96 percent at the end of June 2025, down from the 4.18 percent level they expected at the end of March 2025, as indicated in the previous survey.

The survey’s projections have generally mirrored the overall trajectory of interest rates, with forecasts ranging from 2.4 percent in the first quarter 2023 survey to 4.18 percent in the first quarter 2024 survey.

Analysts see more opportunities in stocks and bonds

Fixed-income investments are currently offering some of the best returns in years, thanks to the interest rate hikes of 2023 and 2023. However, investors should be mindful of potential rate cuts on the horizon and their impact on fixed-income assets going forward.

Nine out of 10 experts in the Bankrate survey anticipate the Fed to lower interest rates during its September 17-18 meeting. A rate cut could influence the amount of cash investors hold.

“If (the Fed is cutting) because inflation has moved toward the 2 percent target…sidelined cash will get put to work as money market rates come down,” says Patrick O’Hare, chief market analyst at Briefing.com.

However, if the rate cut signifies a struggling economy, O’Hare warns that stocks may suffer, making Treasuries a more appealing option.

“If rates are declining due to faltering growth or a recession, it won’t bode well for stocks in general,” says O’Hare. “In this scenario, there would be opportunity in Treasuries, and cash would be held dear as investors seek to preserve capital.”

The possibility of lower interest rates may suggest that now is the ideal time to purchase longer-term bonds to secure and “lock in” higher yields.

“We would look at yields on the long end at 4.75 percent and above as an opportunity to extend duration ahead of Fed rate cuts,” says Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, referring to longer-dated bonds.

At the same time, lower rates may attract some investors to shift from bonds to stocks.

“Lower rates and strong growth typically present a compelling opportunity for those holding cash to invest in equities,” says Dec Mullarkey, managing director of investment strategy and asset allocation at SLC Management.

Meanwhile, experts like Sam Stovall, chief investment strategist at CFRA Research, caution that stock price growth could decelerate following the initial rate cut.

“Stock prices tend to increase at a slower pace after the Fed has cut rates than in anticipation of the first rate cut,” says Stovall. “Additionally, cash and bond holders are likely to maintain their fixed-income exposure rather than increasing their equity positions.”

• Methodology

  Bankrate’s second-quarter 2024 survey of stock market professionals was conducted from June 14-28 via an online poll. Survey requests were sent to potential respondents nationwide, and responses were voluntarily submitted via a website. Respondents included: Sameer Samana, senior global market strategist, Wells Fargo Investment Institute; Dec Mullarkey, managing director, SLC Management; Patrick J. O’Hare, chief market analyst, Briefing.com; Sam Stovall, chief investment strategist, CFRA Research; Brad McMillan, chief investment officer, Commonwealth Financial Network; Chuck Carlson, CFA, CEO, Horizon Investment Services; Michael K. Farr, president and CEO, Farr, Miller & Washington; Charles Lieberman, chief investment officer, Advisors Capital Management; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Hugh Johnson, chief economist, Hugh Johnson Economics.

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. Additionally, investors are advised that past performance of investment products is not indicative of future price appreciation.