• Julius Baer projects U.S. 10-year Treasury yields could ease toward 4.30% in H2 2026 if upcoming data softens the labor market.
  • The bank expects the Fed to keep rates on hold in 2026, while the ECB may raise rates once more.
  • Analysts caution that the jobs market might not be as strong as recent data suggests.

Yield Outlook Hinges on Labor Data

Julius Baer anticipates that U.S. 10-year Treasury yields could fall slightly to around 4.30% in the second half of 2026, provided upcoming economic data shows a softening labor market. The Swiss private bank's forecast comes amid growing uncertainty about the true strength of the U.S. jobs market, which it believes may not be as robust as recent figures imply.

"The labor market data we've seen could be overstating the actual health of the economy," a Julius Baer strategist said in an interview. "If upcoming reports confirm a slowdown, we expect yields to drift lower as the Fed maintains its hold on rates."

Policy Divergence: Fed vs. ECB

Julius Baer predicts the Federal Reserve will keep interest rates unchanged through 2026, while the European Central Bank is expected to raise rates once more. This divergence reflects differing regional economic conditions, with the U.S. facing potential slowdown risks and Europe still grappling with inflationary pressures.

"The yield curve could re-steepen as rate cuts are priced in but economic data remains mixed," the strategist added. "This environment should keep profits for banks anchored by a supportive funding environment and stable credit conditions."

Market Implications

If yields fall toward 4.30%, fixed-income investors such as pension funds and insurers could see smaller income streams but more stable price behavior. Equity valuations might benefit from lower discount rates, though this depends on inflation and growth prospects.

Julius Baer's outlook contrasts with some other major banks, which forecast yields declining further to 4.0%–4.2% before a rebound, while others see a plateau around mid-4% levels. The dispersion underscores the market's sensitivity to incoming data and central bank signals.

Correction: An earlier version of this article misstated the timeframe for the yield target. It is H2 2026, not H1.