As Yields Retreat, HSBC Sees 10-Year Treasury at 4.65%, Not 6%, by Year-End

The 10-year Treasury yield fell to 4.951% on Monday, retreating further from last week’s 19-year high of 5.041%. HSBC now sees the yield closer to 4.65%, not 6% by year-end, arguing the retreat has room to run.

Falling oil prices and hope for a deal with Iran calmed markets Monday. That marks a sharp reversal from the hawkish mood that drove last week’s spike.

HSBC’s Treasury Yield Forecast Turns More Hawkish

HSBC actually lifted its entire Treasury curve forecast this month. It raised its two-year year-end forecast to 4.20% from 3.85%, and its 10-year target to 4.65% from 4.30%. The bank still expects the Federal Reserve to hold rates through 2027 as its base case.

However, HSBC now sees near-even odds of a hike this cycle. It called the Federal Open Market Committee’s (FOMC) internal debate “on a fine edge.”

The bank credited Fed Chair Kevin Warsh’s Jackson Hole remarks with easing summer’s term premium. Persistent fiscal deficits, it said, will keep pressure on the curve further out.

“An increasingly asymmetric skew in dual mandate risks means the distribution of potential outcomes has changed, and we think this likely sustains upward pressure on front-end yields even if the Fed doesn’t tighten policy in the near term.”

(HSBC)

Where Other Forecasters See the 10-Year Yield

Not everyone agrees on the destination. Miller Tabak’s Matt Maley calls 4.8%, the more urgent test. He warned a sustained break above it could ripple into other assets.

Deutsche Bank’s data on past tightening cycles suggests a 6% run is more a 2027 story than a near-term one.

iCapital’s 5.3% forecast lands higher still, with Dan Suzuki pointing to oil rather than the Fed as the driver. ZeroHedge’s bear case argues 6% arrives regardless of how orderly the path looks.

Forecasts now cluster between 4.65% and 5.3%. That makes a decisive break above 4.8%, not a leap to 6%, the nearer-term signal to watch.

This week’s Purchasing Managers’ Index (PMI) data, jobless claims, and several Fed speeches should test which camp is right.

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