Bond market economists are now predicting the rally in 10-year Treasuries is on its last legs, with last week's jobs report expected to be yet another sign the U.S. economy is gaining steam. John Lonski, chief economist at Moody's Investors Service, is forecasting June's payrolls will grow by 200,000, rebounding from May's disappointing addition of 78,000. He thinks this could potentially send the 10-year above 4.25%. Last Wednesday, the 10-year benchmark yielded 4.07%. Lonski noted June's early data is indicative of an improving U.S. economy, specifically reports on consumer confidence, initial state unemployment claims, manufacturing and auto sales.
Milton Ezrati, partner and senior economic strategist at Lord, Abbett & Co., is also calling for healthy economic growth of 3.5 to 4% this year, which he expects will send the 10-year's yield up to around 4.75% by year-end. "I know it's arrogant to say [the bond market is] wrong and you're right, but that's what we think," Ezrati commented, adding the market had been "taking false heart in weak statistics."
Earlier this spring, many prominent bond bears predicted the 10-year's rally was here to stay on the heels of Bill Gross, cio of Pacific Investment Management Co., forecasting in his widely followed monthly commentary the 10-year note could fall to 3% over the next three to five years (BW, 6/6).
