CITIC Bank International warns US 10-year yield may hit 5.5% this quarter
CITIC Bank International predicts US 10-year Treasury yields could rise to 5.5 per cent this quarter amid sustained selling of US and European bonds. The bank also forecasts Hong Kong's best lending rate may rise twice this year, while home prices could fall 2 per cent in the quarter.
CITIC Bank International has warned that the yield on US 10-year Treasury bonds could rise to 5.5 per cent this quarter, as a sustained sell-off in US and European government bonds pushes yields to multi-decade highs.
Zhang Hao'en, head of investment for personal and corporate banking at CITIC Bank International, said persistent inflation and fears of a renewed European debt crisis among highly indebted nations were driving yields higher. He noted that while the US Federal Reserve is not in a position to raise interest rates again soon, strong bond issuance demand and increased supply from the US Treasury were prompting investors to demand higher yields.
Zhang expects US inflation to fall significantly only in the second half of next year. He said the 10-year yield could rise further to 5.5 per cent this quarter, but when it will decline depends on oil and commodity prices, as well as whether persistently high interest rates affect the economy and change market expectations of Fed rate hikes.
Chief economist Ding Meng said current US inflation is mainly cost-driven, with no signs of economic overheating. He noted that US mortgage rates above 7 per cent are curbing housing demand. Ding estimates the Fed will raise rates only in the first quarter of next year, with three rate hikes in total in 2027. He expects Hong Kong to follow with two increases in the best lending rate, each of 0.125 percentage points.
Ding also said Hong Kong's residential property inventory is clearing slowly, and new immigrants have not significantly boosted demand. He forecasts Hong Kong home prices will fall 2 per cent this quarter and 5 per cent for the full year in 2027.