Investors should prepare for a near 1 percentage point increase on the U.S. 10-year sovereign bond yield before the end of 2018, according to one investment manager, who cited robust wage growth and tightening monetary policy.
The 10-year U.S. Treasury note is a benchmark government bond that helps set prices for debt instruments all over the world, including U.S. mortgages — making it a critical asset to track for those seeking to invest. This means that when the yield moves higher consumers are likely to have less money available to spend as mortgage repayments rise. It also means that firms will face higher costs on their debts and thus offer fewer returns for equity investors or curb expansion.
According to one investment manager there could be a large increase in U.S. interest rates before year-end, provided a trade war does not escalate.
“I think we are above 3.5 percent by year-end … And if you push me I think 3.75 percent,” Patrick Armstrong, chief investment officer at Plurimi Investment Managers, told CNBC’s “Squawk Box Europe” Friday.
On Friday morning, the yield on the 10-year Treasury note stood at 2.8327 percent.