TD Securities strategists raise US neutral rate expectation by 50 basis points
Source: Global Market Report
TDSecurities stated that a higher nominal neutral rate should keep US Treasury yields elevated for a longer period, with the 10-year Treasury yield expected to fluctuate within the 4.25% to 4.66% range in the near term.
"We now believe that the range for the US nominal neutral rate is 3.25%-3.50%, which is 50 basis points higher than our previous estimate," said strategists including Oscar Munoz.
"The continued resilience of US households, substantial investment demand driven by artificial intelligence development, and a favorable financial environment all indicate that the current monetary policy stance is at best near neutral."
TD Securities also noted that despite a weakening US labor market, inflation in the services sector remains strong, suggesting that policy may not be restrictive enough.
The Federal Reserve's hawkish stance will continue to flatten the US Treasury yield curve, while a higher neutral rate means the dollar will remain in a "robust trading range."
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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