US Bond Yields to Rise Over 3 to 6 months – Danske Bank

US bond yields are expected to continue their ascent over the next 3-6 months, according to analysts at Danske Bank. They hinge this uptick on a faster economic recovery in the US and rising inflation expectations. These are expected to lead to a discussion on how soon or otherwise the Federal Reserve could start tapering its QE program.

Danske Bank believes that the Fed would start tapering more quickly than it did in 2014. The bank’s analysts also believe that in the summer, the market could start pricing in “one or two rate hikes in H2 22.”

According to the outlook report, Danske Bank would “expect long US yields to increase further”, within the next three to six months. The bank expects yields to rise to “1.85% (1.7%) and 2.0% (1.8%) in three and six months, respectively”. 

Technical Outlook for US 10-Year Yields

The daily chart on the US 10-year bond yield shows an evolving symmetrical triangle, with the active daily candle bouncing off the double support formed by the triangle’s lower edge. This candle needs to break beyond the 1.636 resistance to target the triangle’s upper edge, which puts that area at risk of a breakout. An eventual breakout from this border also takes out 1.685, with 1.782 (30 March high) and 1.856 lining up as potential targets along the path to the price projection at 1.950. This picture is in keeping with the projections of the Danske Bank analysts.

On the other hand, a rejection at the current resistance could allow for a decline which puts the lower triangle edge at risk. A breakdown here targets the 1.600 psychological price level, with 1.538 and 1.438 lining up as additional targets to the south.

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US-10 Year Yield; Daily Chart

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