U.S. Treasury yield forecasts moved slightly higher in the latest strategist poll conducted April 7-9, conducted across the period in which markets absorbed a ceasefire announcement tied to the reopening of the Strait of Hormuz as well as renewed regional hostilities. The modest upward revisions come despite a pronounced spike in oil prices - a near-65% peak increase since the U.S.-Israeli war on Iran began, with prices still 36% above pre-conflict levels - that has erased investor expectations that the Federal Reserve would be able to cut rates this year.
Across March, Treasury yields exhibited significant volatility, with the benchmark 10-year note trading within a 56-basis-point range - the widest monthly swing since April 2025, when then-U.S. President Donald Trump first announced sweeping tariff plans. Each successive turn in the regional conflict has produced sharp moves in yields, and the brief hope attached to a possible reopening of the Strait of Hormuz was tempered by fresh fighting elsewhere in the area.
Although a majority of respondents to the April 7-9 poll raised their forecasts compared with March, the median outlook for the 10-year is for only a small rise relative to current levels. The poll's medians project the benchmark 10-year yield at about 4.26% in three months and six months, and 4.25% in 12 months.
"Sticky inflation expected to rise at least over the short run should keep long-term yields up," said Collin Martin, head of fixed income research and strategy at the Schwab Center for Financial Research, reflecting concern that elevated near-term inflation readings will sustain upward pressure on longer-dated yields.
By contrast, the rate-sensitive 2-year Treasury yield is forecast to edge down modestly, with medians of 3.70% in three months and 3.55% in six months. If those moves materialize, they would produce notable steepening across the curve, pushing the spread between the 10- and 2-year yields - currently near 50 basis points - to roughly 56 basis points by end-June, 71 basis points by end-September and 85 basis points in a year. Prices move inversely to yields, so those directional forecasts imply falling short-term yields while longer-dated ones hold firmer.
Fiscal dynamics also entered strategists' thinking. Schwab's Martin noted that conflicts of this nature tend to be expensive and require funding, which could elevate Treasury issuance and place upward pressure on long-term yields. Expected heavy issuance in coming years combined with the absence of a clear deficit-reduction plan were cited as additional forces likely to push yields on longer-maturity debt higher.
Despite those pressures, strategists remain divided on whether the recent inflation impulse will endure. Many still expect the spike in inflation stemming from the conflict to prove temporary and not to become a prolonged problem for the U.S. economy.
"The overall growth shock should keep rates in check...and keep a sustained lid on upward movement of yields," said Vishal Khanduja, head of broad markets fixed income at Morgan Stanley Investment Management. "We think it's going to be more of a bull steepener rather than a bear steepener-type of environment going forward." Khanduja added that the assumption persists that inflation will be transitory in the U.S. economy relative to other parts of the globe.
Measures of compensation investors demand for inflation risk have moved differently across horizons. Several short-term gauges of that extra compensation have risen in recent weeks, while longer-term inflation measures have shown minimal change.
Matthew Raskin, head of U.S. rates research at Deutsche Bank, observed that while market pricing anticipates elevated inflation readings over the coming year, it does not price in persistence into the medium term. "The inflation risk premium in the Treasury market is at very subdued levels. But I would argue that looks rather low relative to upside inflation risks," he said, noting a gap between market complacency on medium-term inflation and the potential for higher-than-expected inflation outcomes.
Overall, the poll portrays a market grappling with elevated near-term inflation risks and fiscal financing pressures while many strategists still expect those forces to be temporary. That mix has produced only incremental upward revisions to yield forecasts and underpins a consensus view of modest curve steepening rather than a sustained broad-based climb in yields across maturities.