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The Federal Reserve’s expectations that the U.S. economy will continue to expand and necessitate additional interest rate hikes to combat inflation prompted HSBC to raise its year-end forecast for 10-year U.S. Treasury yields to 3.5% from 3%, strategists at the bank wrote in a note on Thursday.

“At a time when the Fed remains hawkish with the support of recent GDP data, there is pressure for short-dated bond yields to remain elevated, and this affects the whole curve,” wrote the firm’s analysts, led by Steven Major, the global head of fixed income.

The firm expects 10-year Treasury yields to end 2024 at 3%.

Benchmark 10-year U.S. Treasury yields hit a 16-year high of 4.49% on Thursday, while interest-rate sensitive 2-year yields hit a 17-year high of 5.2%. Bond yields move in the opposite direction of prices.

The U.S. central bank left interest rates unchanged on Wednesday as markets had expected. But policymakers bolstered their hawkish stance with a further rate increase projected by the end of the year and monetary policy forecasts kept significantly tighter through 2024 than markets had anticipated.

Despite the Fed’s hawkishness, there are reasons to believe that global central banks are closer to cutting rates than markets now forecast, strategists at Capital Economics wrote in a note on Thursday. The firm expects to see 21 out of the world’s 30 major central banks cutting interest rates by this time next year.

“Despite all the talk of ‘higher for longer,’ we believe that the global monetary policy tightening cycle is drawing to a close,” the firm wrote.

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