Danske Bank: Premiums for US and European maturities expected to rise

Danish bank analysts Kirstine Kundby-Nielsen and Jens Peter Sorensen stated in a report that with the expected significant increase in bond issuance, term premiums are expected to rise in the US and Europe over the next 12 months. These analysts attributed the increase in issuance to high government budget deficits in the coming years. They stated, "Therefore, we expect that even if the Federal Reserve continues to lower its policy rate target, long-term rates in the US will still rise over the next year." Danish bank forecasts that the yield on 10-year US Treasury bonds will reach 4.30% and 4.45% in six months and twelve months respectively, currently at 4.167%; the yield on 10-year German government bonds is expected to reach 2.90% in six months and twelve months, currently around 2.825%.