Treasury Yield Forecast Changes | LPL Daily Market Update

Tuesday, April 6, 2021

Top Story

Raising Economic And Market Forecasts…Again

On the LPL Market Signals podcast, Equity Strategist Jeff Buchbinder and Asset Allocation Strategist Barry Gilbert update forecasts based on how the economy’s recovery from the pandemic, aided by vaccine distribution, massive stimulus, and the desire to return to normal, continues to surpass expectations.

Daily Insights

U.S. stocks open little changed after the S&P 500 Index reached another all-time high on Monday.

  • European markets are higher in midday trading with the United Kingdom outperforming.
  • Stoxx Europe 600 Index is on track to surpass pre-pandemic highs.
  • Mixed fortunes for Asian stocks overnight as Japan slips while Hong Kong surges.

Revisiting our Treasury Yield Forecast

  • We have increased, and narrowed, our year-end forecast for the 10-year Treasury yield to a range of 1.75% – 2.0%.
  • Stronger economic growth and inflation expectations, an increase in Treasury supply and eventual Fed tapering may cause yields to rise.
  • Yields may temporarily eclipse 2.0% as inflation readings pick up but much higher yields would likely be attractive to income investors.
  • For more on our decision to increase our Treasury Yield forecast see this week’s Weekly Market Commentary and today’s LPL Research blog, available at 12p.m. ET.

Policy in play, but it’s a slow moving process

  • The Senate parliamentarian gave further leeway on potentially passing additional bills under the reconciliation process, which only requires a simple majority in the Senate.
  • West Virginia Senator Joe Manchin, the most centrist Democrat in the Senate, said he could see the corporate tax rate at 25% but not 28%.
  • Higher corporate taxes in some form are likely coming, which could bring a 5-10% hit to corporate earnings in 2022.

Technical update

Despite robust headline gains for U.S. equities on Monday, participation was meager with advancers outnumbering decliners on the New York Stock Exchange (NYSE) by less than 2:1. Consumer discretionary, communication services, and technology led, powering the Nasdaq Composite through recent resistance to its highest level in six weeks.



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