High Treasury volatility won’t prevent yields from falling

Treasury volatility has fallen over recent weeks but remains high by historical standards, and we wouldn’t be surprised if it remained so over the rest of 2023 even after the Fed has concluded its tightening cycle. All else equal that could put upwards pressure on 10-year Treasury yields via the term premium; but we still think 10-year yields will fall this year as investors pare back their expectations for the fed funds rate.