Why bond traders should be ‘cautious’ in 2025

November’s Consumer Price Index (CPI) — which measures inflation in prices of consumer goods and services — is due out Wednesday morning. This could be a key piece of inflation data just one week ahead of the Federal Reserve’s last policy meeting of 2024, where the central bank is expected to cut interest rates by 25 basis points.
PNC Financial Services Group chief economist Gus Faucher and UBS Global Wealth Management head of taxable fixed income strategy Leslie Falconio join the Catalysts team to talk more about the outlooks on inflation and the Fed’s rate path in 2025.
“The drivers are going to be for slower inflation going forward. We’re seeing slower wage growth in the economy, and then also we should see lower rental, shelter inflation as we continue to see rents rent grow slow,” Faucher tells Yahoo Finance. “And so that should bring overall inflation down over the next year or so.”
Falconio expands upon her forecasts for Treasury yields (^TYX, ^TNX, ^FVX) and how much the Fed could cut rates next year:
“But the market has really shifted to a much more hawkish sentiment, with only about 60 basis points of cuts priced in for 2025. So we think that’s a bit overdone, so we’re actually looking for yields to come down in [2025]. Not by a lot, maybe to around that 4% ten-year yield level.”

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