US 10-year yield is around 3%. The 3% level is key for economists at ING.

The move down to 3% should be classed as an overshoot to the downside

“One of the simplest models for long-tenor rates is to look at the futures strip as far out as it goes (with reasonable liquidity) and add a moderate premium to this (maybe 20 bps). Employing that, we find that by mid-2024, the implied Fed funds rate is 3.5%. The fed funds strip can, of course, shift lower, and we think it will, ending up at 3%.”

“That 3% level is key for us, as it provides a target for the 10yr yield to aim for. Evidence of stress in the banking sector and tightening in credit conditions is likely to push us in that direction in the coming months or maybe even sooner. However, any break below 3% should prove short-lived, as even the move down to 3% should be classed as an overshoot to the downside.”