Investors who want to lock in high rates on longer-term Treasurys may want to act sooner rather than later, according to Wells Fargo Investment Institute. The 10-year Treasury is currently yielding around 4.2%. “As the economy slows, inflation eases from pandemic levels, and the Federal Reserve keeps interest rates higher for longer, we believe longer-term rates are not far from a ceiling,” Scott Wren, the firm’s senior global market strategist, wrote in a note last week. “We think 10-year Treasury yields in the 4% to 4.5% zone may represent a fixed-income opportunity for investors who have been seeking higher yields over the course of the last 15 years,” he added. US10Y YTD mountain 10-year Treasury Longer-dated yields have moved noticeably higher since the middle of July, in part because the U.S. Treasury raised its quarterly funding requirement of the amount of government debt it would sell by about $267 billion, to a total of $1 trillion of government debt, he said. Fitch’s downgrade of U.S. debt on August 1 was also a factor, Wren added. “It makes sense that investors would require a higher yield when purchasing government debt in the wake of these announcements,” Wren said. When it comes to Wells Fargo’s fixed-income strategy, it takes a barbell approach. In addition to 10-year Treasurys, the bank has also lowered its equities allocation and “parked” those funds in short-term Treasurys, getting yields over 5% in 3-, 6- and 12-month maturities, Wren wrote.
This story originally appeared on CNBC
