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Ten-year Treasury yields will stage a sustainable run above 1%, Wells Fargo predicts

Ten-year Treasury yields will stage a comeback this year: Wells Fargo

Wells Fargo Securities believes 10-year Treasury yields are on the verge of a sustainable run above 1%.

Michael Schumacher, the firm's chief macro strategist, expects improving economic conditions will push Treasury yields higher and prices lower.

"You've got so many factors coming together," he told CNBC's "Trading Nation" on Monday. "As we suspect, you'll see continued progress on the virus."

Schumacher's base case points to a better jobs picture as businesses reopen. A rebound in hiring won't happen overnight, but he feels it'll be enough to inject investor confidence into the markets and provide a catalyst for yields.

He sees the 10-year yield within the next three weeks trading around 0.80%, a 21% bump from current levels.

By summer, Schumacher predicts yields could make a comeback above one percent.

"By the end of the year, we think they go quite a bit higher," added Schumacher.

His year-end target on the 10-year yield is 1.25%, which assumes there will be no second wave of virus cases. The yield hasn't traded  above that level since March 20 when it hit a high of 1.28%.

'It sounds really out there, but it's not'

"It sounds really out there, but it's not. You consider the path of yields this year, it's been straight down," said Schumacher. "If the virus course does reverse and if the economic impact seems like it's mitigating somewhat, 1.25% seems very much in reach to us."

His latest forecast coincides with this week's Fed meeting on interest rates. He expects chair Jerome Powell to update Wall Street on its aggressive bond buying program. 

"One big thing for the U.S. which we think is a plus is the response here has been huge, and it's been very quick," Schumacher said.


Why Wells Fargo predicts 10-year yields will bounce above one percent this year