As the pace of growth accelerates, forecasts for 10-year Treasury bond yields have also risen. These are some of the most recent.
figure 1: Ten-year constant maturity treasury bond yield (black), CBO (red), administrative department (blue), survey of professional forecasters (blue-green) and WSJ April (gray x). The date in the chart is related to the finalization of the forecast. Source: CBO budget and economic outlook update (July), fiscal year 2022 budget (June), Philadelphia Federal Reserve SPF (May), Wall Street Journal survey (April).
Despite some obvious disagreements, the fact is that by mid-2022, CBO’s forecast will not be far from the professional forecasters surveyed by the Wall Street Journal or the Philadelphia Federal Reserve.
On the other hand, the increase in the expected trajectory has mainly occurred with the actual development of the recent yield, returning to the mean value in the past few years (this is based on the average of the input variables from 1994 to 2004, as described in this article). Documentation).
figure 2: Ten-year constant maturity treasury bond yield (black), CBO outlook for July 2021 (red), February (blue), July 2020 (blue-green), January 2020 (grey). The date in the figure is related to the finalization of the forecast. Source: CBO, different dates.
An increase of 50 basis points in yields during the two-year period to the second quarter of 2023 is approximately equivalent to an increase of 40 basis points in real yields from January to June.
This model of forecast correction—predictions in recent decades have often exceeded reality—is not unique to CBO.More about this postal.