U.S. 10-year Treasury yields are expected to rise modestly in the coming months, while short-dated yields are forecast to decline on rate cut bets, according to a Reuters poll. Despite potential risks and a mountain of upcoming supply, the largest debt market shows inertia.

President Trump’s budget will require $3 trillion of borrowing over the next decade, but current pricing remains unaffected. The 10-year Treasury yield is forecast to trade at 4.10% in three and six months, rising to 4.21% in a year. Market-based inflation expectations are lower.

Inflation evidence from U.S. tariffs and government shutdowns has not significantly impacted Treasury yield forecasts. Bond markets are overly responsive to near-term developments, potentially leading to inflation over-indexing. The Federal Reserve’s preferred inflation gauge remains above 2%.

Rate-sensitive two-year Treasury yields are expected to fall in the coming months despite interest rate futures pricing in rate reductions by end-2026. Most respondents believe the yield curve will modestly steepen by end-January, anticipating higher term premiums due to rising Treasury issuance.

Market experts predict a steeper yield curve with the long end underperforming the front and belly of the curve as Treasury issuance increases. Despite uncertainties, the market remains cautious about the path of future easing, particularly ahead of the December Fed meeting.

Read more at Yahoo Finance: US 10-year Treasury yields priced for no inflation surprises, set to rise modestly: Reuters poll