Wall Street veteran Yardeni: Inflation cooling is in sight, 5% US Treasuries are "very attractive"

Ed Yardeni, president of Yardeni Research, said the US 10-year Treasury yield looks "very attractive" around 5% as inflation is expected to cool. "To buy the 10-year Treasury at 5%, you have to be relatively optimistic that productivity will drive inflation down, and I think that will happen," Yardeni said in an interview. "I think a 5% yield is very attractive." Yardeni's comments came as US Treasuries were poised for a second day of gains after Democrats' sweeping midterm election victories fueled expectations that the Trump administration's tax and spending plans could be constrained. Yields on the world's largest bond market fell at least four basis points across maturities, with the benchmark 10-year yield dropping to 4.84%, the lowest level since September 10. Yardeni is a Wall Street strategist known for promoting the "Fed Model" framework for equity valuation which compares the S&P 500's expected earnings yield with the US 10-year Treasury yield. He said rates are now "back to long-term normal levels." "The inflation outlook for the next decade is around 2% to 2.5%," he said. "At the same time, if you can get a 2.5% real return, that's actually pretty good in the bond market." He expects the 10-year Treasury yield to fluctuate between 4% and 5%, a range closer to typical levels before the global financial crisis.