Wells Fargo lifts 2027 10-year Treasury yield forecast to 5.25%-5.75%

The upgrade follows a rise in the 10-year yield to 5.23% on Monday, its highest since 2007

Wells Fargo Investment Institute has raised its forecast for the 10-year US Treasury yield to a range of 5.25% to 5.75% by the end of 2027, up from a prior forecast of 4.50% to 5.00%.

The call follows a sharp move in the bond market. The 10-year yield rose seven basis points on Monday to 5.23%, its highest level since 2007, while the 30-year yield reached 5.47%. Benchmark yields have climbed almost 65 basis points since the end of August. Money markets are currently pricing three rate hikes over the next year, and Fed officials have pointed to persistent inflation above target and supply shocks as reasons rates may stay elevated.

The dollar gained and gold fell 3.9% to $4,118.66 on Monday. Wells Fargo has also trimmed its gold target, a pairing that sits awkwardly with the higher-yield call: a world of higher long-term yields normally raises the opportunity cost of holding a non-yielding asset like gold, so the firm's stance suggests it sees fiscal and rate pressure outweighing the traditional case for holding gold as a hedge.

A 75 basis point upward shift in a long-run 10-year yield forecast marks a material repricing of the fiscal and inflation risk built into long-duration Treasuries, and it undercuts the bond bull case that lower policy rates alone will keep long-end yields contained. Higher long-term yield expectations weigh on equity valuations, particularly for rate-sensitive growth and real estate stocks, and increase the relative appeal of cash and short-duration holdings over taking on duration risk. The net effect, on Wells Fargo's own view, is bearish for long-duration fixed income and for duration-sensitive equities.