Could Rising Liquidity Force US Bond Yields To Re-test 5%?

The Investment Cycle is 'Normal' But Bonds Are Not

We remain downbeat on bonds. This has looked to us a ‘normal’ cycle, at least when measured by liquidity conditions, the performance of equities, industry group sectors of the stock market, credit markets and to a lesser extent the US real economy. However, it is an untypical cycle for government bonds, because yields have been hugely distorted by Fed and Treasury policy actions. Investors need to be warned that these distortions now look set to unwind.

Our target for the US 10-year Treasury note is 5¼%, equivalent to a near 8%