"We do not view the end of QE2 as a reason for rates to spike," Nomura strategists led by George Goncalves wrote in a report published April 19. "If the markets behave according to prior QE experience, we should see the curve flatten and rates stay in check."
A flatter yield curve would mean a smaller difference between short- and long-term bond rates. Ten-year notes yield 2.73 percentage points more than two-year securities, compared with the mean of 1.16 percentage points since 1991.
In its first round of bond purchases the Fed bought $1.7 trillion of mortgage and Treasury securities in 2009 and the first quarter of 2010. Within three months of that program ending, 10-year yields fell to 2.93% from 3.83%.
HSBC Holdings Plc has the most bullish year-end yield forecast among the primary dealers at 3.4%, followed by Societe Generale at 3.5%, according to a survey by Bloomberg News. Jefferies Group Inc. has the most bearish call at 5%, followed by BNP Paribas' 4.25%.