Mark Grant: Why the US 10-year could fall to 1.25%

10-year Treasury going to 1.25% by end of year: Mark Grant
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Hilltop Securities' Mark Grant is known for making bold calls, and on Thursday, he made one for U.S. 10-year Treasury bonds.

Grant told CNBC's "Squawk Box" he sees the U.S. 10-year yield falling as low as 1.25 percent as the Federal Reserve leaves rates unchanged this year. The 10-year is currently yielding more than 1.8 percent.

"I think interest rates are going to stay low and head lower, as a matter of fact. I don't think the Fed is going to do anything for the entire year," Hilltop's managing director said.

While he sees a "slight" chance the Fed's policymaking committee could move in June, an April rate hike appears to be off the table following a speech by Fed Chair Janet Yellen on Tuesday that was widely seen as dovish.

The Fed is unlikely to raise rates in September because it would come to close to the presidential election, Grant added. The central bank typically avoids rate hikes near major elections.

In a recent note, Grant highlighted remarks from Yellen that overseas developments could affect the U.S. economy, potentially slowing the pace of labor market improvement and restraining growth and inflation.

That would fly in the face of the Fed's dual mandate to support full employment and control price increases. Its current inflation target is 2 percent.

Yellen has faced criticism for sending mixed signals and for standing pat as the economy improves. But Grant said the Fed would be doing the right thing to stay its hand, given that the Bank of Japan and the European Central Bank have pushed interest rates into negative territory.

Lower rates abroad have the effect of essentially tightening monetary policy in the United States.

"I think the Fed has finally come to grips with reality, if you will, that the United States is no longer standing there, separate from everybody else," he said.