A 6-8% 10-Year Yield Is Possible If The Fed Loses Control
There is a lot of dovish rhetoric coming out of the Fed. If the central bank decides to hold rates flat from here and is done hiking at a time when prices for goods and services continue to rise, the market will step in and do the Fed’s job for it.
Investors will dump longer-term Treasuries driving yields higher if they believe that the Fed is too dovish. If that happens the market isn’t going to drive yields 100 basis points higher and then magically stop. The market will keep pushing and we could wake up one day in February to a 10-year yield that is 6%-7% or higher. If the Fed is done hiking, it better accelerate QT to get the excess liquidity out of the system. Unfortunately Fed Chairman Jerome Powell is not up to the task in my view.