Interest Rate Paths for the Treasury Ten Year

As the pace of growth has picked up, forecasts of ten year Treasury yields have risen as well. Here are some recent ones.

Figure 1: Ten year constant maturity Treasury yields (black), CBO (red), Administration (blue), Survey of Professional Forecasters (teal), and WSJ April (gray x). Dates in graph pertain to forecast finalization.Source: CBO An Update to the Budget and Economic Outlook (July), FY2022 Budget (June), Philadelphia Fed SPF (May), WSJ survey (April). 

While there are some notable divergences, what is true is that through mid-2022, the CBO projection is not far off from professional forecasters as surveyed by WSJ or Philadelphia Fed.

On the other hand, the upward shift in the projected trajectory has largely followed recent actual developments in yields, with reversion to mean in the out years (which is based on 1994-2004 averages of input variables as described in this document).

Figure 2: Ten year constant maturity Treasury yields (black), CBO July 2021 Outlook (red), February (blue), July 2020 (teal), January 2020 (gray). Dates in graph pertain to forecast finalization. Source: CBO, various dates. 

The 50 bps increase in yields for the two year period to 2023Q2 is about equal to the 40 bps increase in actual yield going from January to June.

This pattern of forecast revisions — with predictions generally overshooting actual in recent decades — is not specific to CBO. More on this in this post.



37 thoughts on “Interest Rate Paths for the Treasury Ten Year

  1. pgl

    If the 10-year interest rate does rise to 2.5%, this might cool housing valuations a wee bit but it would not lead to the disaster forecast ala Princeton Chicken Little Steve.

  2. Moses Herzog

    One thing I noticed earlier in the week and forgot to mention. Larry Summers is cackling about housing prices now. Is Larry Summers a closet “Princeton”Kopits fan???

  3. Moses Herzog

    In years past on the blog, I would put links up to David Lee Roth’s “Yankee Rose” or some links honoring the U.S. Military. This year I will put this photo up of photographer Adam Ferguson of NYT and a young migrant on the Mexican side of the southern border (She was traveling with her Grandma), and ask Americans that if you were the little girl or her Grandma and you were living in a place of squalor such as Guatemala etc, just what exactly would you do with yourself?? And what exactly did YOU do before birth, to merit being born in America??

  4. Moses Herzog

    Didn’t realize Yang got clobbered in mayor race. I think Adams is a solid candidate as well, so not going to fret too much about Yang. I thought Yang pulled some cynical moves that made him appear disingenuous. Whether NYCers sensed that also and it cost him some votes we’ll probably never know.

    Apparently AOC’s endorsed candidate is still in it?? I’m glad she still has her head above water, but I still don’t think she has a chance in hell of winning. I think Adams should at least get the party nomination, so, looks like he’s got a bright future.

    1. pgl

      Yang spent almost all of his air time bashing everyone else. It was sad to see as he basically impressed no one.

      It will be either Eric Adams or that blonde Democratic version of Bloomberg.

      1. EConned

        pgl & Moses Herzog are in near constant violation of Econbrowser’s stated policies. Shame on these regular visitors who poop in the face of the blog’s hosts.

        Bad traffic should not be better than no traffic at all.

        *post police out*

        1. pgl

          A complaint from the wannabe host of Jeopardy?

          Alex – I’ll take Economics for $400!

          1. EConned

            “Economics for $400”? You can’t even read and interpret a basic graph… you wouldn’t even pass the initial Jeopardy! test and meet the minimum eligibility requirements. “Economics for $400” hahahaha – get lost & find the blog’s stated commenting policies while you’re meandering around lost.

          2. pgl

            July 5, 2021 at 5:03 pm

            This fool does not get the joke – even though the joke is on him.

        2. Moses Herzog

          @ EConned
          Your newfound respect and concern for Professor Chinn is touching. Though probably gives Menzie a complete feeling of indifference beings that he is 10,000 times the man you are.

          1. EConned

            What do you mean “ newfound respect and concern for Professor Chin “? When have I shown disrespect to him and how is my pointing out violators of the blog’s policy showing respect to him? Also, please show your math supporting “that he is 10,000 times the man” that I am.

          2. Moses Herzog

            You’ve made multiple cutting remarks towards Professor Chinn. You want a single example of why he’s 10,000 times the man you are (among an endless list) ?? Because if you were hosting a blog, you wouldn’t allow comments made towards yourself like Menzie has allowed in the name of extreme objectivity and neutrality as the host. You would never. Menzie believes in dialogue and the interchange of ideas and education. So he tolerates many comments made toward himself.

            So~~~once every, what (??), 40 posts he allows himself to revisit the record of commenters and you think that is some sin?? WOW… just WOW. He’s using their own comments to demonstrate a point. Someday he’s going to get tired of people like you though, and then the regular readers edified by this blog will be the ones stripped of the knowledge. It’s always like that, the 5 whatever agitators always have to ruin for those who want to learn something. THEN you’ll be happy you’ve ruined it for those of us who learn something nearly every day here.

          3. EConned

            Menzie – my comment that you’re referencing was my reply to another proclaiming “Don’t Feed The Troll!!!”. And I do think that you’re a troll (as indicated in the very post that you linked and many others. So, yes, this blog likely wouldn’t be sustainable if you aren’t fed a troll-worry diet. Why? Because your trolling is a sizeable portion of this blog’s volume.

            You must admit that it’s rather humorous the comment of mine that you’ve selected is actually in reply to another’s comment who was saying that you’re engaging in trolling AND your most recent blog post is a troll of a decades-old comment. LMK if that somehow is not clear to you but in the meantime I’ll try to stop laughing so hard.

          4. EConned

            Moses Herzog
            You’re hilarious.
            “Someday he’s going to get tired of people like you though, and then the regular readers edified by this blog will be the ones stripped of the knowledge. It’s always like that, the 5 whatever agitators always have to ruin for those who want to learn something. THEN you’ll be happy you’ve ruined it for those of us who learn something nearly every day here.”

            Menzie creates this atmosphere – he fosters it and, via revealed preference, he desires such an atmosphere. I will also note that the quality content of this blog has decreased markedly over the past few years so if you’re learning something nearly every day here from Menzie’s posts, it doesn’t speak highly of you (but your comments/questions have already shown this). Also note that he has already stated that he’s tired of people like you – just go read his stated rules on staying on topic – you should be ashamed of yourself given that you continually disobey the very mentor you idolize.

          5. CoRev

            Menzie, quit the trolling! The latest Climate Change article is an example of click bait. Tsk, tsk.

            Econned, you’ve probably noticed that Menzie is a little thin skinned when challenged.

      2. Moses Herzog

        @ pgl
        Referencing to Mayoral candidate Yang~~Sometimes substantive people, will do non-substantive things with the goal of winning. I hope this was the case with Yang, rather than he was an empty vessel from the get-go. Here is another one I want to give him the benefit of the doubt. Though I have been burned on those “benefit of the doubt” things with people in my life before, more than I care to say.

  5. pgl

    The sensible residents of New York City do not subscribe to the rag known as the NY Post. Now if one sees a copy on the subway, we read the sports page and then use the rest of this trash to line our bird cages.

    Case in point this horrific garbage that alleges the alleged teach of “critical race theory” is dividing our nation. Self projection I say as the MAGA hat wearing racists at the NY Post are dividing the nation in service of the agenda of Donald Trump.

    I’m generally a free speech advocate but my city should ban this retarded rag:

    1. Moses Herzog

      New York City residents are “a very bright bunch”, there’s no denying that.

      From the Jon Campbell’s USA Today story:
      Gov. Andrew Cuomo’s convincing victory Tuesday was fueled almost entirely by New York City and its suburbs, pushing him to a 22-point win despite losing most of the state’s counties.

      Some of you may be wondering, How did Andrew Cuomo do in the primaries, against a progressive female candidate?? There’s a well labeled/demarcated map in the WaPo link I share below. Well, The green counties went to Cynthia Nixon, the blue counties went to Andrew Cuomo. Even with pgl’s poor reading comprehension he should be able to make out the colors in the NYC area. I have faith in pgl to at least be able to differentiate 3-4 colors on a state map:

      Here are some of the things Cynthia Nixon mentioned in her concession speech that probably would not have happened had she not entered the race. I lift verbatim from the CNN article:
      “For seven and a half years, the Governor said he had no power to disband the IDC, the group of breakaway corporate Democrats who handed the State Senate to the Republicans. Then, two weeks into our campaign, he miraculously disbanded them.”
      “Just last year, the Governor opposed recreational marijuana and labeled it a ‘gateway drug.’ We came out strongly in favor of legalizing it as a matter of racial justice, and the next day, the Governor declared that ‘the facts on marijuana have changed.’ Now, the state is actually moving towards full legalization.”
      “From the day I entered this race, we made the crisis in the New York City subway a cornerstone of our campaign. Now, everyone in New York understands that the Governor controls the subway, and it’s the Governor’s responsibility to fix it.”
      “On the same day that we released our climate justice plan in the Rockaways, the Governor reversed himself and halted the construction of a pipeline that would’ve devastated that community’s water and health.”
      Other issues she brought up: “Banning plastic bags. Untying teacher evaluations from test scores. Increasing funding for NYCHA. Protecting Seneca Lake. Restoring voting rights to felons on parole. The list goes on and on.”

      Cynthia Nixon rounded off her comments:
      “As progressives,” Nixon told them, “and as New Yorkers, we have to hold the governor accountable for the commitments he’s made over the last 6 months. But these are real victories.”

      “Some people have called this the Cynthia effect. I call it what happens when we hold our leaders accountable.”

      So who did as pgl calls them “the sensible residents of New York City” vote for??? I guess the man who was handing out kickbacks, candy, and government pork projects to whoever would fund his campaigns and feedback loop of cash to Cuomo’s “good friends”. The “sensible residents of New York City” did not vote for the progressive female who ran against Andrew Cuomo.

      Yes, as pgl labels them, “”the sensible residents of New York City”, voted for the man who A) Intentionally covered up nursing home deaths B) sexually molested multiple female office staff C) Used state funds and state resources to promote his autobiographical book sales and promotion D) funded the legal defense of one of his highest ranking staffers who ended up in prison….. and on and on and on.

      New York City voters are so “sensible” they should get honorary membership into the dumb red states club with states like Kentucky.

      1. pgl

        Wow – talk about living in the past! Randy Andy has just over another year left and he ain’t getting a new term. So why note figure out a progressive with some actual experience besides starring in a show with three other self absorbed ladies.

  6. JohnH

    Interesting read in NY Times last week: “ Higher Inflation Ahead? Maybe. But Don’t Even Try to Predict It.”

    “ In certain circles, everyone seems compelled to talk or write about surging prices, and some economists and bond mavens even sound as though they know where inflation is heading.

    But there are good reasons to question that aura of certainty.

    In fact, thanks to some new research, one thing is clear: Bond traders and academic and corporate economists don’t have any real ability to predict whether inflation will rise or fall in the months and years ahead. Neither do consumers…”

    Inflation is so important in bond pricing that bonds may conceivably be capable of telling us where inflation is heading.

    But, no: The study shows that the bond market is no good at this, either. Again, the research draws finer distinctions. Bond mavens are a little better than economists at predicting short-term inflation, while economists are a smidgen better than bond mavens at looking a few years ahead.”

    I guess it’s just human nature to speculate and get paid to do it!

    1. pgl

      I hope you do not rely on people in the business community to forecast anything beyond today’s weather. Take as one example – any prediction from management consultant guru Princeton Steve. Need I say more?

      BTW – our host will tell you forecasting exchange rates is not exactly that easy.

    2. pgl

      I forgot to mention the classic joke:

      Why do economists forecast?
      To make the weather man look good!

    3. ltr

      July 2, 2021

      Higher Inflation Ahead? Maybe. But Don’t Even Try to Predict It.
      Consumers, economists and bond traders often attempt to forecast inflation, but we really are walking in the dark.
      By Jeff Sommer

      In fact, thanks to some new research, one thing is clear: Bond traders and academic and corporate economists don’t have any real ability to predict whether inflation will rise or fall in the months and years ahead. Neither do consumers.

      As far as major shifts in inflation go, we are all in the dark — just as we are essentially clueless about where the stock market is heading or the price of oil in 2022, or the date of the next recession.

      Two staff members at a nonpartisan Washington think tank — the Peterson Institute for International Economics — conducted the inflation research. They are Joseph E. Gagnon a senior fellow at the institute who was an official at the Federal Reserve and an economist at the U.S. Treasury, and Madi Sarsenbayev, an institute fellow.

      In a pithy message * on Twitter, Mr. Gagnon summarized their scholarly findings, which the institute published in four separate posts. “Bottom line: nobody forecasts well,” he said….


      1. ltr

        Chinese monetary authorities focus on price problems sector by sector, after all they know that prices for pork are falling faster than wished and prices for steel rising faster so each sector is specifically a policy target. The intent is to seldom have to use general or Western-style monetary policy. Relatedly, about possible price pressure for oil and natural gas, China has found and is developing and already drawing on important domestic reserves:

        June 18, 2021

        China discovers 900m-tonne oil and gas field in Xinjiang–11nUuUWNRaE/index.html

        June 25, 2021

        China’s first self-operated 1.5km deep-water gas field starts operation

  7. ltr

    July 5, 2021

    The June Jobs Report: More Good News on the Economy
    By Dean Baker

    The June jobs report was damn good news. The 850,000 new jobs created was at the high end of what I imagined to be possible. There is a limit to how rapidly businesses can hire. It is easiest when it’s just a matter of recalling workers who are laid off. But the vast pool of people on temporary layoffs has dwindled. As I pointed out, * the share of the unemployment due to temporary layoffs had fallen to a level that was normal for a recession. It was 19.0 percent in June, down from a peak of 77.9 percent last April.

    We also are looking at a situation in which an extraordinarily large share of the unemployed are long-term unemployed (more than twenty-six weeks). Historically, it has been harder for this group of workers to find new jobs.

    For these reasons, it didn’t seem likely that we could have the sort of million plus monthly job growth that we saw last summer. In that context, adding 850,000 jobs in a month is probably about as good as we could hope for.

    The strong job growth was associated with strong wage growth, especially for workers in lower-paying sectors. This is consistent with the hard to get good help story that we are constantly hearing about in the business press. Of course, it is not really impossible in most cases to get more workers, restaurants added 195,000 jobs in June, employers just have to pay more money.

    The story in the June data is that workers are getting pay increases, and this is especially the case for workers at the bottom of the wage ladder. The data from the Bureau of Labor Statistics’ establishment survey are not ideal for measuring wage growth for different groups (the Current Population Survey is much better, but the monthly and even quarterly data are very noisy) but we can get a general picture.

    The data for the last year are somewhat skewed by composition effects (the lowest paid workers lost their jobs, thereby raising average pay), but if we take the averages for the last two years, with most workers now rehired, the impact of composition changes is more limited. What we see is that average wage growth has been strong over this period, but it has been strongest for the lowest paid workers.

    [ ]

    As the chart shows, the average hourly wage for all workers increased at an average annual rate of 4.3 percent. If we look at the average for all production and non-supervisory workers, a category which excludes most higher paid workers, the average annual increase has been 4.6 percent. It has been even higher in the industries with the lowest pay. Average annual increases in retail has been 5.8 percent, while in the category that includes hotel and restaurant workers it was 6.0 percent.  

    This is a big deal for these workers. In the case of hotel and restaurant workers, the increases over the last two years come to $1.77 an hour. For someone working a full-time full-year job (many of these workers only work 20-30 hours a week), this would mean a pay increase of more than $3,500 a year.

    Of course, how much this translates into higher living standards will depend on inflation. Inflation over the last two years has averaged 2.6 percent annually. This means that the lowest paid workers still got large pay increases, even after adjusting for the rise in prices. After adjusting for inflation, the average hourly wage for retail workers still rose by a little more than 6.4 percent over the last two years. For restaurant workers the increase was a bit less than 7.0 percent.

    We will likely see a somewhat slower pace of wage growth once the surge of reopening hiring is over. As pandemic restrictions have ended over the last few months, many businesses rushed to staff up to accommodate more customers. This led to a record number of job openings reported for April. The story is likely to be similar in the May data released this week, but we will probably be through this stretch by the end of the summer….


  8. ltr

    July 5, 2021

    Over 1.3 bln doses of COVID-19 vaccines administered in China

    BEIJING — More than 1.3 billion doses of COVID-19 vaccines have been administered in China as of Sunday, as the country continues to ramp up its inoculation drive, the National Health Commission announced on Monday.

    [ Beyond the administration of more than 1.3 billion doses of Chinese vaccines domestically, more than 480 million doses have been distributed internationally. ]

    1. ltr

      July 5, 2021

      China opposes Australia’s blocking of China’s vaccines to PNG

      BEIJING — China on Monday expressed grave concern over and firm opposition to Australia blocking China’s COVID-19 vaccine aid to Papua New Guinea (PNG), calling it a breach of the basic humanitarian spirit.

      Foreign ministry spokesperson Wang Wenbin made the remarks at a press briefing in response to a relevant query.

      According to media reports, Australia has planted several “consultants” in the national epidemic prevention center in PNG and proactively tried to set up hurdles to delay and thwart the authorization of and access to China-assisted vaccines, even blocking PNG leaders who want to welcome the Chinese vaccines.

      Wang said it was a disregard for the lives and health of the people of PNG that some people in Australia used the vaccine issue to engage in political manipulation and bullying coercion, which has gravely undermined global anti-epidemic cooperation.

      China insists on treating vaccines as a global public good and helping developing countries save as many lives as possible, Wang said….

      1. ltr

        June 3, 2021

        China, Papua New Guinea to deepen Belt and Road cooperation

        Chinese State Councilor and Foreign Minister Wang Yi on Thursday said China is ready to work with Papua New Guinea (PNG) to strengthen strategic alignment and deepen the joint building of the Belt and Road Initiative.

        Wang made the remarks when he met with PNG’s Minister of Foreign Affairs and International Trade Soroi Eoe in Guiyang, capital of southwest China’s Guizhou Province.

        China is the first country Eoe visited since he took office. He is also the first dignitary from a Pacific Island country to visit China since the COVID-19 outbreak.

        “This fully reflects the special significance of China-PNG ties,” Wang said.

        Calling PNG a good friend, brother and partner of China, Wang said bilateral cooperation has been accelerated in various fields, which has become a prime example of peaceful coexistence and win-win cooperation between the countries of different sizes.

        This year marks the 45th anniversary of the establishment of diplomatic relations between the two countries.

        The Chinese foreign minister said one of the most important lessons learned from China’s long-standing relationship with PNG is that both sides have always treated each other as equals and supported each other’s core interests and concerns….

    2. ltr

      July 3, 2021

      Australia found blocking Pacific Island nations from getting China’s COVID -19 vaccines

      By planting Australian consultants in Papua New Guinea to manipulate local epidemic prevention policies targeting China, obstructing the authorizing of Chinese vaccines’ emergency use, threatening senior officials from welcoming Chinese vaccines, Australia has been found sabotaging and disturbing Pacific Island nations’ cooperation with China on vaccines and anti-virus measures, the Global Times reported.

      Experts criticize Australia’s actions as hurting people’s interest in the Pacific Island countries out of a pure Cold War mentality.

      The Global Times has learned exclusively from sources that Australia has been racking its brain to undermine China’s vaccine cooperation with Pacific Island countries. For example, it has planted several “consultants” in the national epidemic prevention center in Papua New Guinea and manipulated the country’s policies in the fight against COVID-19. Under Australia’s colonial-style dominance, some of Papua New Guinea’s new prevention policies target Chinese.

      Despite that China has effectively controlled the epidemic domestically, PNG still lists China as “high risk” and requests foreigners arriving in the country to wear electronic location finders with high charges. But the fact is that currently, only Chinese travel to PNG to resume work in the country’s projects.

      As for China’s supply of vaccines to Papua New Guinea, Australia has also proactively tried to set up hurdles to block the authorization for emergency use of Chinese vaccines. In February, China announced it would offer vaccines to Papua New Guinea and also provided the trials data on the vaccines, but with Australia working in the shadows, Papua New Guinea’s epidemic prevention center did not approve the emergency use of Chinese vaccines until the end of May, when Australia provided vaccines had already arrived in the country.

      Sources also told the Global Times that when the Chinese vaccines arrived in Papua New Guinea, the country’s president had planned to welcome them at the airport, but he was blocked by Australia, which also threatened Papua New Guinea’s officials by saying that if they would welcome the Chinese vaccines, they must bear the consequence of Australia ceasing investment in the country’s road projects….

      1. pgl

        Your little lie was exposed so you double down with a long repeating of the same lie? Everyone – ignore this PRC bot.

  9. baffling

    right now, the 10 year yield has dropped to 1.323%. it has been dropping since its peak this past march. for those arguing for inflationary issues, what does the 10 year bond behavior tell you?

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