Deutsche Bank (DB) believes that the price of the 10-year Treasury note is set to head lower with a yield target of 4.45% and a stop at 3.9%. The yield on the note currently sits at 4.087% and has an inverse relationship with its price.
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Strategists led by Francis Yared reached this conclusion after the latest Survey of Senior Loan Officers (SLOOS) was released by the Fed. The survey showed that the willingness of banks to extend consumer loans rose to the highest level since 2022, while demand for mortgages increased for the first time since 2021.
SLOOS Points to Steady Growth, Raising Pressure on Bond Prices
“The signal sent by the SLOOS is consistent with the top-down assessment that the U.S. should grow at or slightly below potential,” said the strategists.
Bonds typically underperform when the economy is growing normally, as this scenario reduces safe-haven demand. If the economy is chugging along as usual, bonds face the risk of decreasing in price as investors allocate their capital to higher-risk investments.
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