The yield on the 30-year US Treasury bond could climb to 6% as early as this month, according to BMO Global Asset Management’s Earl Davis, who says persistent volatility in the bond market could create a cycle that pushes long-term borrowing costs even higher.
Davis described a move above 6% as “inevitable,” potentially within October, during an appearance Monday on Bloomberg Television’s Surveillance.
Bond Market Volatility
According to Davis, investors tend to concentrate on one major factor at a time when assessing the outlook for interest rates, whether it is inflation, economic growth or another force affecting monetary policy.
The focus has now shifted directly toward interest rates, he said, increasing the potential for further volatility in the Treasury market.
“What makes it inevitable?” Davis said, explaining that markets have limited capacity to focus on multiple major drivers simultaneously. With investors now concentrated on rates themselves, he believes the resulting volatility could reinforce upward pressure on long-term yields.
A rise in the 30-year Treasury yield to 6% would represent a significant increase in long-term borrowing costs and could have broader implications for financial markets.
Higher Treasury yields typically influence borrowing costs across the economy, including mortgages and corporate debt, while also affecting the relative attractiveness of stocks and other risk assets.
For investors, the possibility of a 6% yield underscores the growing importance of the bond market as markets reassess the outlook for rates and the forces driving them.
