Estimates for U.S. growth in 2014 were marked down to 2.2 percent from 2.5 percent the month before, according to economists in a June 6 to June 11 Bloomberg survey. The International Monetary Fund lowered its forecast on June 16 to 2 percent from 2.8 percent in April.

“Some of the growth we wish we could go back to was far more frail than most people realize,” FTN’s Vogel, 58, said in a June 23 telephone interview. Economic growth averaged 2.8 percent during the previous expansion from the end of 2001 through 2007.

Many forecasts for higher yields reflect the teachings of “old analysis” that has become less applicable in an economy where more than three years of rising employment has yet to be joined by higher wages, Vogel said.

Lowering Estimates

The market for interest-rate futures shows traders are lowering their estimates of how high the target federal funds rate will go once the central bank starts tightening. Prices now show it ending up at 3.13 percent, compared with bets of more than 4 percent at the start of the year.

In January 2011, when 10-year yields reached 3.49 percent, FTN was the only firm in a Bloomberg survey of 70 analysts to predict the yield would fall to 2 percent. The median estimate was 3.75 percent, while the yield ended the year at 1.88 percent.

In May 2012, when the 10-year note was trading at 1.79 percent, Low said Europe’s financial turmoil and slow growth might push 10-year yields to 1.5 percent. The yield fell to a record low 1.379 that July.

Low started his career in 1987 at Carroll McEntee & McGinley, a primary dealer. Low joined FTN, which trades bonds with institutions and advises on fixed-income portfolios, in 1998 when it opened its New York office. He has been collaborating with Vogel on interest-rate calls since 2000.

Defunct Newspaper

After leaving his first job as a business reporter for a now-defunct Memphis newspaper in 1978, Vogel was hired by FTN, working in the corporate treasurer’s office, then moving to fixed income in 1982.

The bond market consensus is coming around to the view of Vogel and Low. The year-end 10-year yield consensus has declined to 3.05 percent from 3.44 percent in January. Citigroup Inc. lowered its projection on June 27 to 2.95 percent from 3.35 percent, citing the Fed’s reduced estimate for the ultimate level of its federal funds rate target.

Traders are finding it too expensive to keep betting against bonds, forcing them to buy the securities to exit their so-called short positions, said Jim Bianco, president of Bianco Research LLC in Chicago. He said he expects 10-year yields to fall to 2.25 percent this year.

“The relationship between nominal growth and interest rates is not as strong as they think it is,” Bianco said in a June 25 telephone interview. “If you want a fundamental reason for the squeeze, the growth is not there. If rates go to 3.5 percent, every single person makes money on it except Chris Low and me, because we’re the only ones who are bullish on the market.”

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