Bank of America strategists cut U.S. bond yield outlook, expect Fed to revise threat and risk assessment

Bank of America interest rate strategists cut their forecasts for US Treasury yields as the bank expects recent economic data to prompt changes in the Federal Reserve's threat and risk assessment. The team of strategists, led by Mark Cabana, cut their end-of-year outlook for the two-year yield to 3.5 per cent from 3.75 per cent previously. They expect the 10-year yield to be 4.25 per cent by the end of December, compared with a previous estimate of 4.5 per cent. "Recent US data have significantly changed the market's pricing of the interest rate outlook and our view of US interest rates," Mr. Cabana wrote in a note on Monday. "The risk that the Fed's independence could be undermined, which could mean greater tolerance for inflation and greater support for low rates at the central bank, is factored into our calculations."