The yield on 10-year Treasuries has fallen below 3% for the first time this year and by more than 60bp since early April. To some, this rally must inevitably come to an end soon. After all, the Fed’s second round of quantitative easing draws to a close this month and the US public finances are in dire straits. We disagree and continue to expect the 10-year yield to hit 2.5% by year-end.
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