Credit Agricole: Treasury Yields Expected to Stay High Into 2027

Rates are expected to remain elevated over the coming months after the recent bond selloff driven by inflation concerns, large fiscal deficits, heavy corporate issuance and expectations for a hawkish Fed. The 2-year Treasury yield is seen moving toward 4.9% as further rate hikes are delivered, while the 10-year is expected to trade around 5.00% by year-end and remain high into early 2027. The curve is expected to flatten through Q1 2027 as the Fed tightens, then stabilise by mid-year once the hiking cycle ends. A steeper curve could emerge later in 2027 if improving inflation allows rate cuts. At the long end, swap spreads are expected to widen as Treasury buybacks and reduced issuance help support long-dated bonds.