BNP Paribas predicts an increase in U.S. Treasury yields and a strong dollar reaching parity with the euro by 2025. The bank anticipates U.S. inflation will rise mid-year due to upcoming tariff measures, prompting the Federal Reserve to maintain interest rates throughout 2025. Calvin Tse, Head of Americas Macro Strategy, advises underweighting U.S. Treasuries as inflation accelerates, expecting the 10-year yield to hit 4.65% by year-end.
The Fed is expected to hold rates between 4.25%-4.5%, while the ECB may reduce rates to 2%. BNP Paribas recommends long positions in 5-year U.S. TIPS and the dollar. Investors should watch U.S. Treasury term premiums closely, while long-term bonds are favored in the eurozone.
