US Treasury yield curve to steepen next year as Fed cuts rates, says BofA

BY Reuters | ECONOMIC | 11/29/23 11:16 AM EST

NEW YORK, Nov 29 (Reuters) - The U.S. Treasury yield curve, which plots the yields of different government bond maturities, will likely steepen in 2024 as the Federal Reserve will start cutting interest rates, a Bank of America (BAC) analyst said on Wednesday.

U.S. Treasury benchmark 10-year yields are expected to be at 4.25% by the end of next year, said Mark Cabana, head of U.S. rates strategy at BofA, in a media briefing.

Demand concerns will likely continue to impact long-dated bond yields, which rise when prices fall, as the Treasury is expected to ramp up debt issuance, he said. (Reporting by Davide Barbuscia)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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