Allspring Global Investments
If the Fed’s 2% inflation target is achieved, then the federal funds rate will likely be 3–3.5% by the end of 2025. The Treasury yield curve will likely normalize and steepen as a result, but longer-maturity bonds are vulnerable to higher yields if inflation remains elevated and/or fiscal impulses strengthen. We believe bonds should deliver “bond-like” returns in 2025.
Allspring Global Investments
Yields on the front end of the curve are particularly attractive today, but they are likely to move lower through 2025. Cash investors should consider extending duration to increase the income their portfolios produce while benefiting from duration as yields decline over time.
Allspring Global Investments
Interest-rate volatility is high, and it may move higher due to inflation uncertainty and technical pressure in the government bond market.
Amundi Investment Institute
With the Fed and ECB expected to cut policy rates all the way to long-term neutral levels by mid-2025, Treasuries are expected to lead performance among government bonds, while investment grade credit will also benefit. The low recession probability and non-restrictive fiscal policies (at least in the US) suggest bonds will be key to portfolio diversification, fulfilling their income-generating function.
Amundi Investment Institute
Investors are likely to keep faith with Treasuries as long as the US economy keeps growing but the fiscal outlook points to higher fixed-income volatility.
AXA Investment Managers
There are risks around longer-term interest rates coming from policy uncertainty and the profile of government debt in many countries. This has already led to a cheapening of longer-term government bonds on a relative value basis, when compared to the interest rate swap curve. For some investors, this could provide opportunities to move out of longer-term corporate debt into government bonds
AXA Investment Managers
The prevailing level of yields in developed bond markets provides the basis for robust income returns, which should remain above inflation.
AXA Investment Managers
For short and intermediate maturities, the bond market looks healthy. We see yields as fairly valued given the interest rate outlook – so much so that investors are unlikely to experience similar duration shocks to those seen in 2022 and 2023.
AXA Investment Managers
Our forecasts allow for greater monetary easing in Europe than in the US, reflecting softer growth. Thus, European fixed income investors may see total returns boosted by some decline in bond yields.
Bank of America
BofA forecasts range-bound government bond yields (e.g. Treasuries 4-4 .5%), range-bound corporate bond spreads (US IG bonds 80-100 basis points), and wider emerging-market bond spreads (widening by up to 100 basis points).
Barclays Private Bank
A neutral duration stance seems appropriate, and investors should be on the lookout for rate volatility, as a signal to extend duration selectively. In the credit market, securitised credit could be a useful diversification tool, while relative value and carry options abound in the BB-rated segment. Finally, emerging-market debt provides a vast pool of opportunities for investors to improve a portfolio’s risk-return profile.
BCA Research
Bond yields are likely to move significantly higher in an aggressive fiscal expansion scenario, but that is why moderate fiscal thrust is our base case view. Similarly, while tariffs typically raise prices, they could easily be deflationary on balance if they destabilize global economic activity. That favors a long duration stance.
BlackRock Investment Institute
We are underweight long-term Treasuries on both a tactical and strategic horizon – and we see risks to our upbeat view from any spike in long-term bond yields.
BlackRock Investment Institute
Persistent deficits and sticky inflation in the US make us more positive on fixed income elsewhere, notably Europe. We are underweight long-term Treasuries and like UK gilts instead. We also prefer European credit – both investment grade and high yield – over the US on cheaper valuations.
BNP Paribas
Our forecasts put the end-2025 two-year yield differential between the US and Germany at about 45 basis points wider than forwards currently imply.
BNP Paribas Asset Management
This is a positive environment for fixed income, in which bonds can again offer the income, carry and defensive characteristics to which investors were accustomed before the crisis years.
BNP Paribas Asset Management
The falling cash rate represents an incentive to move out of money market funds and to reinvest before policy rates hit their trough.
BNP Paribas Asset Management
We see emerging-market bonds – particularly those denominated in local currencies – as a better place to take interest-rate risk. Country selection is of course important.
BNP Paribas Asset Management
Longer-term Treasury yields could rise to reflect the uncertainty about the outlook for inflation, to say nothing of the US budget deficit. An extension or expansion of tax cuts would only lead to a further deterioration in the fiscal outlook. As always, however, it is unclear if and when the market will decide to fully price in these risks.
BNY
Bond yields continue to be attractive, and given our outlook for continued Fed rate cuts, we believe bonds are poised to perform well in 2025 once again. Yields across government, corporate and municipal bonds are at decade highs.
BNY
Higher starting yields not only provide investors with attractive income, but they can also act as a buffer against price swings caused by fluctuations in interest rates. This will be beneficial in the year ahead because the interest rate environment could remain volatile. Our estimated range for the 10-year U.S. Treasury note yield of 3.25- 5% for 2025 is wider than normal.
Capital Group
US inflation is trending down towards the Fed’s 2% target. Using history as a guide, this would suggest we might be entering an environment in which bonds could continue to fulfil their traditional role as a portfolio diversifier.
Carmignac
We stay largely shy of the developed market sovereign bond space which, despite circumstances, offer a meager yield. The shape of the yield curve (inverted to flat) and the lingering inflation question leads us to prefer bonds linked to real rates (i.e. inflation-linked) over nominal ones.
Citi
In bonds, we look for relative value, keeping duration longs outside of the US. We switch our European periphery overweight to an overweight in Bunds, and add a new UK overweight. Our underweights are the US and Japan.
Comerica
The 10-year Treasury yield is forecast to average between 4.25% and 4.75% in 2025, and the 30-year fixed mortgage rate between 6.25% and 7%.
Deutsche Bank
The 10-year Treasury yield should hit 4.75% in 2025 with Bunds at 2.50%. The curve in Europe should steepen significantly with a front-end rally. Conversely our strategists believe the front end of the JGB market is vulnerable.
DWS
In the bond market we expect yield curves to steepen further in 2025 as central banks’ interest rate cuts leave their mark on two-year bond yields in particular. At the end of 2025 we see the Fed Funds rate at 3.75-4% and the ECB deposit rate at 2%.
First Abu Dhabi Bank
As far as Treasuries are concerned, the sector looks reasonably well priced, albeit not cheap. In the context of a robust US growth outlook, coupled with the prospect of higher government debt issuance this year (2025), as well as rapidly rising deficits, if all the tax cuts from 2017 are extended by President Trump, we may see some renewed downside pressure on prices in the coming months.
Franklin Templeton
Stronger US growth and the risk of inflation reversing course and moving higher could reduce the scope of Fed rate cuts, which would be a headwind for longer duration US Treasuries in 2025.
Franklin Templeton
Modest growth and falling inflation will allow most other major central banks to ease further, led by the European Central Bank, the Bank of England, and the People’s Bank of China. But because European sovereign debt typically moves in tandem with Treasuries, European yield curves could steepen, and the euro may depreciate further.
Franklin Templeton
Protectionist US tariffs will probably escalate global economic tensions, which could lead to rising risk premiums. If so, global equity markets may struggle, leading to safe-haven flows that boost returns on higher quality sovereign bonds. Accordingly, risk management suggests that investors should include European longer-duration bonds as a hedge against trade-war risk.
Franklin Templeton
Income-oriented investors may want to consider shortening durations until it becomes clearer where interest rates are headed, and despite relatively tight spread levels increasing exposures to corporate credit, mortgage credit and asset backed securities is appropriate.
Goldman Sachs
Given subdued valuations and a pro-cyclical backdrop, EM equities are likely to outperform fixed income, with greater room for policy support in China (and to a lesser extent India). EM equities will likely struggle to generate higher returns relative to US equities, however, especially in vol-adjusted terms. And while EM hard currency fixed income should prove more defensive than local currency in a strong Dollar environment, local currency assets have more scope to outperform if the tails are avoided.
Goldman Sachs
Easing should sustain the outperformance of European rates relative to the US, although the market has moved a long way to reflect this. Better market opportunities may therefore lie in outright longs in Bunds, or a renewed compression of rate spreads between core Europe and Central and Eastern Europe, where the lower growth and rate outlook should spill over eventually.
Goldman Sachs
Bonds, particularly non-US bonds, should provide some protection against growth risks including those from a deeper trade war. Although US inflation risks are quite well-priced at the front end of the curve, expectations are more moderate further along the curve, so TIPS may offer a good portfolio hedge too. And broadening US equity exposure towards mid-cap equities or a more equal-weighted allocation may mitigate concentration and valuation risks.
Goldman Sachs Asset Management
Rate cuts favor fixed income. We believe asset allocation decisions that land on bonds may prove rewarding in 2025. We see opportunities to ride the easing cycle, capture income across corporate and securitized credit, and use a dynamic investment approach across sectors and regions.
HSBC Asset Management
With the yield curve set to structurally steepen, fixed-income returns will increasingly hinge on income components rather than capital appreciation — although less inflation risk and more pronounced growth risks in Europe support the case for duration assets there.
HSBC Asset Management
A higher-for-longer rate environment also challenges traditional 60/40 portfolio constructs, with government bonds losing some of their hedge appeal. This adds to the benefits of alternatives like private credit and real assets, alongside the uncorrelated returns of hedge funds.
HSBC Global Private Banking
We have a neutral stance across almost all bonds’ segments, apart from the Japanese government bonds, where we retain an underweight position. However, we continue to see corporate credit, including dollar investment grade bonds and global high yield as a good way of diversifying multi-asset portfolios and generating income by locking in elevated yields.
Invesco
Long-term government yields will be mixed but most yield curves will steepen. Credit spreads will widen slightly and defaults will rise a little. Bank loan spreads will narrow marginally but defaults will rise a little.
Janus Henderson
Within fixed income, diverging policy in major economies represents an opportunity to reinvest cash, capture excess yield, and diversify returns across geographies.
Janus Henderson
While the 10-year US Treasury yield may see upward pressure from economic strength and potential policy impacts, yields on shorter-dated notes could still fall, although perhaps not as far as in Europe, as policymakers there have more work to do.
Jefferies
For rates, we see a range bound environment for much of 2025. Our bias would be to buy duration on any sell offs, though would prefer to buy European rates over the US.
JPMorgan Asset Management
Slowing yet stable US growth and easing price pressures provide runway for continued cuts through 2025. We see the 10-year yield stabilizing between 3.75%-4.25% in a soft landing scenario, which remains our base case, and below 3.5% in a hard landing scenario.
JPMorgan Asset Management
Extend duration out of cash. As the yield curve shape continues to normalize toward its steeper slope, reinvestment risk is real on ultra short-duration bonds.
JPMorgan Chase & Co.
In rates space we have a strong conviction in long duration in euro (10-year Bund below 2% in the second half) as the challenging growth outlook and the starting level of inflation prepandemic give more confidence on the ability of central bank to take inflation back to target, with risks skewed to the downside.
JPMorgan Chase & Co.
The outlook for US Treasury is more mixed in our baseline scenario of resilience (trough at 4.1% in the third quarter), but with a bullish duration bias at the short end of the curve as the market is pricing no chances of complete disinflation.
LGIM
As a team, we go into year-end short duration, as speculation can build on what the new administration means for the inflation and fiscal outlook. But we intend to rotate that position back to a more structurally positive duration outlook once that reset in expectations is done. Curve steepening is a clear Trump trade that could come unstuck as the year progresses.
LGIM
We think yields on fixed income remain attractive by the historical standards that matter – the memories of current market participants. We consider this to likely be positive for fixed income strategies as we expect significant inflows in search of these yields.
Lombard Odier
In fixed income, we keep our preference for corporate bonds, which will provide higher returns than government bonds. The latter will be challenged by rising budget deficits and public debt, generating more yield volatility. We therefore focus on where we see least pressure for bond yields to rise, notably Germany and the UK.
LPL Financial
Bond yields are expected to remain elevated, with the 10-year Treasury yield likely to remain between 3.75% and 4.25%. Over the next 12 months, we see roughly equal upside and downside risks to yields as the markets grapple with the true impacts of budget deficits, increasing Treasury supply, and the scope of the Fed’s current easing cycle. For fixed income investors, a focus on income generation and duration management is advised and we believe the most attractive opportunities lie in the five-year maturity range.
Macquarie
Our 10-year treasury yield forecast is driven by our outlook for Fed policy, growth and inflation. In 2025, we suspect it will be range bound, but move upwards in the first half on hopes for stronger growth before pulling back in the second half and ending the year at 4.25% as implemented tariffs weigh on the outlook
Macquarie
We see Japanese 10-year yields drifting higher very gradually, to around 1.5% by end-2026 on the back of BOJ policy normalisation and higher global yields.
Morgan Stanley
In fixed income, Treasury yields may continue to decline as the Federal Reserve cuts rates further than what markets have priced. Our economists expect Fed rate cuts to be on hold by midyear, however.
NatWest
Within the bond space, we lean away from Japanese government bonds as it is the one region where inflation and interest rates are rising rather than falling.
Ned Davis Research
We reduced our exposure to 100% of benchmark duration, and closed out our curve steepeners. We are overweight MBS and underweight CMBS and ABS. We are marketweight everything else. Policy uncertainty is set to drive a wide range of outcomes. Fair value ranges from 4% to 5.25% on the 10-year Treasury. Credit remains richly valued. Continue to favor loans over fixed-rate debt.
Neuberger Berman
Bond investors will likely shift focus to the growth outlook through most of 2025, and possibly deficits and the term-premium question late in the year and into 2026. The result will be moderately steeper yield curves and a migration of bond market volatility from the short end of the curve to the intermediate and long parts.
Northern Trust Asset Management
While US inflation likely will settle into a range above the Federal Reserve’s target of 2% for 2025, we expect the path to be bumpy. We believe TIPS are an important defensive portfolio component for unanticipated inflation.
Northern Trust Asset Management
Money market funds remain an attractive alternative to other cash management options like deposits or Treasury bills, even as the Federal Reserve has started to cut rates. We see little chance of money market rates returning to near-zero.
Nuveen
Our general preference for de-emphasizing duration has one notable exception: municipal bonds. The municipal yield curve is steeper than the Treasury curve, and with credit fundamentals looking solid, we think longer-duration positioning in municipals makes sense.
Nuveen
We have a generally unfavorable view toward Treasuries (we see better value elsewhere) and investment-grade bonds (spreads are tight and the duration profile is longer than we prefer).
Nuveen
It makes sense to stick with an overall neutral duration stance (and investors still holding high levels of cash should consider lengthening duration). While the Federal Reserve and other central banks are cutting rates, we don’t anticipate quick or dramatic declines.
Nuveen
Interest rates will likely be lowered more slowly than previously anticipated. In fixed income, this calls for less emphasis on duration positioning and more on generating alpha via relative spreads and credit selectivity. We expect the 10-year Treasury yield to remain mostly rangebound from here.
Pictet Asset Management
We expect US Treasury yields to fall slightly to 4.3% from the current 4.4%, with the Fed cutting interest rates to 4.25%. Real yields – a return bond investors can expect after inflation – are a positive 2.1%. We expect gilt yields to fall to 4% from the current 4.4%, supported by a more favourable inflation outlook compared with the rest of the Europe.
Pictet Asset Management
While bonds may not deliver outsized returns next year, the investment landscape is unlikely to be hostile for fixed income assets. Based on our base-case scenario – which is for benign growth and moderating inflation — we expect benchmark bond yields to stay range-bound, but real rates will be positive for most developed government bonds.
Pimco
We expect yield curves to steepen as central banks lower short-term rates, creating a favorable environment for fixed income investments. Historically, high quality bonds tend to perform well during soft landings and even better in recessions. Moreover, bonds have recently resumed their traditional inverse relationship with equities, providing valuable diversification benefits.
Pimco
Bond yields are attractive in both nominal and inflation-adjusted terms, with the five-year area of the yield curve particularly appealing. Cash rates are set to decline alongside policy rates, while high government deficits may drive long-term bond yields higher over time.
Principal Asset Management
Fixed income investors should consider the early 2025 rate environment a unique entry point to capture attractive starting yield levels and mitigate reinvestment risk.
Principal Asset Management
With a greater likelihood for the lasting path of front-end rates to be lower versus higher, increasing duration now will better position a portfolio to take advantage of falling rates. Coincidentally, increasing duration will reduce the risk that an investor sitting in cash and cash equivalents today will have to reinvest that money at a lower rate by locking in yield for a longer period.
Principal Asset Management
As the year progresses, high-quality, longer-duration fixed income should outperform on a risk-adjusted basis as the inverted yield curve steepens and an economic slowdown becomes more apparent. Holding investment-grade paper should better position portfolios to weather an economic downturn and help reduce default risk.
Robeco
Improved global liquidity due to supportive procyclical fiscal and monetary policy bodes well for another year of risky assets beating sovereign bonds.
Robeco
We generally expect negative macro surprises in the US given our below consensus 2025 US GDP call, and inflation will surprise to the upside in the second half of 2025. US bond yields are likely to peak somewhere in the 4.5%-5% bracket, reflecting a US nominal growth rate averaging above 4% in 2025.
Russell Investments
We see a steepening yield curve offering opportunities in short-term bonds, as short-term rates are expected to decline faster than long-term yields.
Russell Investments
We believe that post-US election dynamics, improving earnings, and attractive valuations may create compelling opportunities for US small caps in the year ahead. We also see a steepening yield curve offering opportunities in short-term bonds, as short-term rates are expected to decline faster than long-term yields.
Schroders
The old-fashioned reason for owning bonds — to generate income — is back and we continue to argue for their inclusion in portfolios. Divergent fiscal and monetary policies around the world will also provide cross-market opportunities in fixed income and currency. Strong corporate balance sheets support the yield offered by credit markets.
Societe Generale
We again cut our exposure to government bonds on worsening fiscal metrics, debt-sustainability concerns and the threats from tariffs (EM local currency bonds cut 3 percentage points to zero). Credit, the “new cash,” now has an equal weighting to sovereign bonds, at 19%, this being driven by credit-rating upgrades.
Societe Generale
An important debating point for markets in the run-up to the German general election (23 February 2025) is the increasing likelihood of the debt-brake rule being removed, and a fragmentation of the main political forces, as in France. This implies that the party(ies) in power would almost certainly need to secure the 2/3 majority in both chambers of parliament needed to change the constitution. We continue to recommend heavy overweights in the peripheral markets versus the core markets, in bonds and equities, and increase the weighting towards the UK. We like banks in Europe too.
State Street
While spreads across both investment grade credit and high yield debt are near historic lows, we are optimistic about prospects for fixed income assets next year, and see a generally favorable environment for advanced economy sovereign debt. Market sentiment swings and volatility could potentially create opportunities for investors to manage or extend duration.
T. Rowe Price
Bond yields have been on a roller coaster ride as markets have tried to anticipate shifts in central bank policies. Given current market pricing, this implies upside risk to yields. Where to focus: Cash yields remain attractive, but longer duration fixed income is vulnerable. High-yield bonds and bank loans are best positioned for yield, while emerging market bonds also present favorable income prospects.
Tallbacken Capital
We simply won’t know where the Trump bond and equity puts are struck for some time, or for that matter, whether Trump’s reaction function to bond and stock movements is itself a moving target. This discovery process means volatility — first and foremost in the bond market.
Truist Wealth
For bond investors, the sharp reset higher in yields over the past three years has laid a solid foundation to deliver reliable income as well as stability during periods of equity volatility.
Truist Wealth
We anticipate the Fed will cut rates 75 to 100 basis points from current levels by the end of 2025. Notwithstanding temporary overshoots, we estimate the 10-year U.S. Treasury yield will trade primarily in a range between 3.75% to 4.50%, which should provide opportunities to adjust our current neutral duration stance.
UniCredit
Assuming monetary easing will progress as we expect in both the euro zone and the US, we believe long-dated yields of eurozone government bonds and Treasuries have little room to decline from their current levels. With respect to the 10-year Treasury yield, we have pencilled in a range of 4.4%-4.6% for the end of 2025, 40-60 basis points higher than the terminal rate. We expect the 10-year Bund yield to remain in a range between 2.2% and 2.4% by the end of 2025
UniCredit
Bonds will be in demand given their still-attractive carry, with rate cuts being well priced into government and corporate bonds.
Vanguard
Higher starting yields have greatly improved the risk-return tradeoff in fixed income. Bonds are still back. Over the next decade, we expect 4.3%–5.3% annualized returns for both US and global ex-US currency-hedged bonds. This view reflects a gradual normalization in policy rates and yield curves, though important near-term risks remain.
Wells Fargo
Implied terminal rates look too high. We continue to stress that markets are pricing too high a probability of a soft landing in the US, UK and Canada. For instance, we estimate the rates market prices about a 90% chance of a US soft landing. In our base case, low growth in US and euro zone leads to 10-year yields falling to 3.75% in the US and 1.9% in Germany.
Wells Fargo Investment Institute
We expect short-term Treasury yields to fall with the Fed policy rate, but longer-term yields should rise with economic growth, tariffs, and immigration restrictions.
Wells Fargo Investment Institute
We see an opportunity for fixed-income investors to remain active and implement defensive and growth-oriented strategies concurrently. We believe that maintaining overweight exposure in US Intermediate Term Taxable Fixed Income will provide investors with the best relative yield while considering potential interest-rate risk. 10-year yield end-year target 4.5-5%.
Wells Fargo Investment Institute
Money market funds and other short-term fixed-income instruments likely will provide less benefit over inflation than in recent years. We favor extending maturities using a laddered strategy, investing first in intermediate maturities (3 – 7 years), next in longer-dated maturities, and finally shorter maturities.