T. Rowe warns: The U.S. fiscal outlook is concerning, and the 10-year U.S. Treasury yield may rise to 6%

According to the Zhitong Finance APP, T. Rowe Price, an American asset management company, believes that as the fiscal predicament in the United States worsens and Donald Trump's policies lead to rising inflation, the yield on 10-year U.S. Treasury bonds may rise to 6% for the first time in over 20 years. Arif Husain, Chief Investment Officer of Fixed Income at T. Rowe, stated in a report that the benchmark 10-year U.S. Treasury yield may first reach 5% in the first quarter of 2025 and could then rise further. Husain further raised his forecast for U.S. Treasury yields, citing that Trump's tax cuts during his second presidential term have led to a persistent U.S. budget deficit, and potential tariffs and immigration policies will keep price pressures lingering. Husain said, "Is it possible for the 10-year U.S. Treasury yield to reach 6%? Why not? We can consider this when the yield exceeds 5%. The political transition period in the U.S. is an opportunity to prepare for rising long-term Treasury yields and a steeper yield curve." The last time the 10-year U.S. Treasury yield touched 6% was in 2000. As traders begin to worry that Trump's policies will stimulate inflation and increase fiscal pressure in the U.S., the outlook for U.S. Treasuries has become increasingly bleak. Investors will closely examine the Federal Reserve's policy statement on Wednesday to gauge the future path of interest rates. The market widely expects the Federal Reserve to cut rates by 25 basis points this week. The 10-year U.S. Treasury yield is known as the "anchor for global asset pricing," affecting the pricing of various assets from corporate bonds to mortgages. During Tuesday's Asian trading session, the 10-year U.S. Treasury yield was essentially flat at 4.40%. Earlier this year, the yield had risen to 4.74%, with the last time it touched 6% being in 2000. Husain's expectation of a 6% yield seems more pessimistic than some of his peers. ING believes that the 10-year U.S. Treasury yield may reach 5% to 5.5% next year, while Franklin Templeton and JP Morgan Asset Management believe it may reach 5%. Husain noted that the declining global demand for U.S. Treasuries also indicates a bleak outlook. Japan, the largest foreign holder of U.S. sovereign debt, sold a record $61.9 billion in securities in the third quarter. Another major holder, China, sold $51.3 billion during the same period, marking its second-largest sale in history. With nearly thirty years of market experience, Husain stated, "Interestingly, the volatility of U.S. Treasuries has exceeded that of other high-rated developed market government bonds, and even some emerging market sovereign bonds, which may lead some investors to withdraw." Husain believes that the likelihood of a U.S. economic recession is "very low," which further diminishes the attractiveness of U.S. Treasuries. He stated, "It seems that the Federal Reserve has successfully guided the economy to achieve the elusive soft landing." ”