LONDON, Feb 12 (Reuters) - HSBC said on Friday that 10-year U.S. and German bond yields will fall further in the coming months, matching their previous historic lows as central banks are forced to persist with ultra-loose monetary policies to revive inflation and growth.
The benchmark Treasury yield will fall to 1.4 percent and the Bund yield to 0.05 percent in the second quarter, said Steve Major, the bank’s global head of interest rates strategy.
“The danger is, the move we’ve had so far this year is difficult to imagine being repeated any time soon. After a big move you usually have to pause for breath,” Major told Reuters.
“But it’s hard to imagine yields going higher. The basis of the current move lower is deeply fundamental. These are structural and secular factors, not cyclical,” he said.
At 1230 GMT on Friday the Treasury yield was 1.70 percent and the Bund yield was 0.22 percent.
On Thursday the 10-year U.S. yield fell to 1.53 percent, its lowest since September 2012, as investor worries over global growth intensified. Futures markets now expect no interest rate hikes from the Federal Reserve at all this year.
HSBC’s year-end forecast remains 1.50 percent. The dip to 1.40 percent in the second quarter would virtually match the multi-decade low of 1.3810 percent struck in September 2012.
Similarly, the bank’s end-year Bund yield forecast remains 0.20 percent but the anticipated fall to 0.05 percent would match the record low of April last year. On Thursday it fell to 0.13 percent.
HSBC said on Thursday it had cut its forecast for the 10-year UK gilt yield to 1 percent from 1.4 percent, a new low it says will be reached by the third quarter. It hit a record low of 1.225 percent on Thursday. (Reporting by Jamie McGeever, editing by Nigel Stephenson)