HSBC expects three Fed rate cuts this year, sees bond yields easing

Steven Major, Global Head of Fixed Income at HSBC, forecasts three rate cuts by the US Federal Reserve this year, followed by two more in 2026.Major explained that while the Fed’s own projections suggest more cuts could happen, it’s also about probabilities. “It’s like saying there’s a 50% chance they cut six times, and a 50% chance they don’t cut at all,” he noted.

He expects bond yields to move lower. “I don’t think the 10-year yield will break above 4.50%. When it hit 5% last year, policy rates were 100 basis points higher than now. With current rates and expectations of easing, it’s hard to see the 10-year going above 4.50%,” he said.

Once rate cuts begin in the second half of the year, he expects yields to head lower, possibly reaching the target 3.5%.
Read Here | Fed faces tough policy call amid stagflation shock: Deutsche BankMajor believes the weakening of the US dollar is partly because it was too high to begin with and is now returning to a more normal level. However, he does expect the currency to weaken some more. Some of the dollar’s recent drop is likely due to these political factors, not just the usual economic ups and downs, he noted.

While some people see the dollar losing its top spot worldwide, Major sees the recent dip as a normal correction, not a long-term trend indicator.

A weaker dollar is good for Asian countries that want to be on an easing path, he said.

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