Wall Street veteran Yardeni: With inflation cooling in sight, 5% US debt is “very attractive”

The Zhitong Finance App learned that Ed Yardeni, president of Yardeni Research, said that as inflation is expected to cool down, the yield on US 10-year Treasury bonds at around 5% seems “very attractive.”

“To buy 10-year treasury bonds with a 5% yield, you have to be relatively optimistic that productivity will drive inflation down, and I think this will happen,” Yardeni said in an interview. “I think a 5% yield is very attractive.”

As Yardeni made these comments, US Treasury bonds are expected to rise for the second day in a row. Prior to the Democratic Party's victory in the midterm elections, fueling market expectations that the Trump administration's tax and spending plans may be curtailed. The yield of the world's largest bond market fell by at least four basis points for each term, and the yield on the benchmark 10-year treasury bond fell to 4.84%, the lowest level since September 10.

Yardeni is a Wall Street strategist known for promoting the “Fed Model” (Fed Model) framework for stock valuation—a framework that compares the expected profit yield of the S&P 500 index to the yield on US 10-year Treasury bonds. Interest rates are now “back to a long-term normal level,” he said.

“The inflation outlook for the next ten years is around 2% to 2.5%,” he said. “At the same time, if you can get an actual return of 2.5%, that's actually pretty good in the bond market.”

He believes that the yield on 10-year treasury bonds will fluctuate between 4% and 5%, a range closer to the typical level before the global financial crisis.