The Global Macro Outlook:The outlook for US bond yields

US 10-year bond yields are expected to move only marginally higher as theUS Fed continues to increase its policy rate. We expect a continuation of theFed’s “slow and cautious” policy, and, on average, 50bps per year until the upperend of the Fed Funds range reaches our forecasted terminal level of 2% inmid-2019. We forecast a fair-value cycle high UST 10-year bond yield of 2.7%.

These are unchanged forecasts. Please see pages 2-6.

The OECD LI for October, released on 8 December 2016, saw another strongimprovement, for the eighth month in a row. Global real GDP growth is forecastto remain in “the long grinding cycle”, chart below, but is forecast to move fromthe lower bound towards the upper bound.

Our 2016, 2017 and 2018 global real GDP growth forecasts are 2.6%, 3.0%and 2.9%, respectively.