With the 1.77 percentage point gap between yields on investment-grade corporates and Treasuries at the widest in three years, U.S. government debt is likely to lag behind company bonds in the remainder of the year, Prudential’s Tipp said.
The benchmark 10-year Treasury yield will rise to 2.46 percent by year-end, according to the median forecast in a Bloomberg News survey. The yield fell to 2.04 percent Wednesday from 2.17 percent at the beginning of 2015.
Traders are pricing in a 43 percent probability of a Fed rate increase by the end of the year, based on the assumption that the effective fed funds rate will average 0.375 percent after liftoff.