With the Fed signaling a slow slog toward normalizing interest rates, Barclays on Thursday cut its year-end forecast for the 10-year Treasury note yield 10_YEAR -0.25% by a quarter of a percentage point, penciling in a level of 2.85% versus its previous forecast of 3.1%.
That points to limited downside for Treasurys after their sharp, Fed-inspired rally on Wednesday. The 10-year yield edged up 3 basis points Thursday to 2.725%.
Barclays strategists think the Fed is now unlikely to start tapering before December. That means the Fed’s first rate hike will come later than the bank previously expected, with the firm now penciling in the first move in June 2015 versus a previous forecast of March 2015.
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