While we continue to expect the FOMC to hike the federal funds rate by 25bp at least twice this year, two such increases are currently anticipated by investors in the bond market. We are therefore cutting our end-2016 forecast for the 10-year US Treasury yield from 2.5% to 2.0%, which is not far above the level of around 1.7% to which it has recently fallen. Nonetheless, we are retaining our forecast that the yield will end 2017 at 3.0%, as the FOMC picks up the pace of tightening next year.
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