UBS remains cautious about the duration of US government bonds and expects German government bonds to perform better.

UBS' interest rate strategists stated in a report that the bank remains cautious on the US duration, but expects German government bonds to perform better. Duration is a measure of the sensitivity of bonds to changes in interest rates. These strategists stated that UBS expects the 10-year US Treasury yield to test higher levels in 2026, then stabilize below current spot levels in 2027. They said, "We expect the US 10-year [Treasury yield] to test at least 4.50%." UBS is bullish on German government bonds, with a target of 2.75% for the 10-year German government bond yield and a stop loss set at 3.15%. They expect the spread between US and German 10-year government bond yields to further widen this year; the current level is 130 basis points according to data from the London Stock Exchange Group. The 10-year German government bond yield rose by 4.1 basis points to 2.984%.