Barclays on outlook for Treasury yields

So too, they expressed sympathy for the notion that the terminal Fed funds rate would be lower that what policymakers at the Federal Reserve had penciled-in.

However, they did not share the belief that a "sudden near-term collapse" in economic growth was lurking just around the corner.

Neither did they think that was the main driver behind the recent rally in bond prices.

Among the factors that would push up yields were expectations, six months' hence, that the nadir in short-term rates was closer, the normalisation of the Treasury's general account and, more generally, bonds seemed priced for perfection, so that the term premium was now too low.

Regarding the Treasury's general account, the sharp fall seen during the first half had reduced the supply that Treasury investors needed to absorb, they explained.

However, that tailwind was unlikely to be repeated.

Barclay's year-end 2021 forecast for 10-year US Treasury note yields was 1.7%.